Creditman, DIIG News Release...
The Dii Group Affirms Third Quarter Expectations and
Provides Company Update
PR Newswire - October 14, 1998 17:06
NIWOT, Colo., Oct. 14 /PRNewswire/ -- The Dii Group, Inc. (Nasdaq: DIIG), a leading
value-added electronics design and manufacturing service provider, today affirmed its optimism for the
contract electronics outsourcing and printed circuit board markets. Specifically, the company expects
to meet its prior expectations of a modest sequential improvement in third quarter earnings in the range
of 24 cents to 26 cents, and sequential earnings improvement from operations for the fourth quarter
and for 1999, despite uncertainty regarding a pending new customer contract.
During the third quarter, the company indicated to investors that it expected to sign a new major
box-build customer, and that its optimism for the fourth quarter and 1999 was partially based on that
expectation. That contract has been delayed, and is less certain, because of a merger between the
potential customer and a major telecom company that has relationships with other electronics
outsourcers. As a result, the potential customer is re-evaluating its combined supplier base. Because
of the heightened uncertainty regarding this contract, the company is readjusting its guidance for the
fourth quarter and 1999, and such guidance will be given in conjunction with its earnings release,
which is scheduled for Thursday, Oct. 22. The company wishes to assure investors, however, that it
fully expects sequential earnings growth from operations in the fourth quarter over the third, and
anticipates at least a 50 percent increase in earnings in 1999 over 1998, excluding asset write-downs
taken in 1998.
"The market is full of growth opportunities, and the Dii companies hold prominent market positions
that should enable us to capture our fair share of that growth," commented Ronald R. Budacz,
chairman and CEO. "Dovatron, our assembly operation, is currently in discussions with several
original equipment manufacturers that are looking to sell assets and rely on an outsourced
manufacturing solution. We can't guarantee we'll win any of those bids, but the level of activity is
encouraging. In addition, despite lower sequential sales in the third quarter, the Dovatron sales force is
enjoying an escalating level of quoting activity. In short, our experience agrees with published market
reports that the contract electronics industry will continue to grow at a 25 percent annual rate through
at least 2001. In 1998, Dovatron has been positioning itself for that growth by establishing operations
in the People's Republic of China and the Czech Republic, in addition to its eight other manufacturing
sites throughout the world."
Budacz continued, "Multek, our printed circuit board (PCB) fabrication unit, is seeing positive signs
for future growth in line with reports from a leading market research firm, which predicts that the
world market for printed circuit boards will grow 67 percent to $50 billion by the year 2004. In 1998,
Multek has positioned itself for that growth with its recent expansion into the People's Republic of
China, its pending acquisition in Europe, and its capacity expansion in Austin, Texas. Multek clearly
now ranks in the global top tier of PCB fabricators based on technology, global capability, and
profitability.
"The other Dii Group companies -- Process Technologies and Orbit Semiconductor -- account for
less than 10 percent of operating income. Process Technologies is experiencing slow growth this year,
but continues to provide good margins and solid cash flow. Regarding Orbit, without question the
downturn of the semiconductor industry has had a severe impact on our financial results in 1998.
Consequently, we have reduced our financial exposure to the industry and are taking other steps to
optimize Orbit's direct contribution to profits. Although the utilization of Orbit's manufacturing facility
continues to be a concern, our new management team there is making significant progress: Orbit's
ENCORE! conversion product had a book-to-bill ratio greater than 1.0 for the third quarter; and the
mixed-signal segment continues to be significantly profitable."
Budacz continued, "The recent acquisition in the People's Republic of China is exceeding our
expectations, and we are anticipating the same from the launch of Multek Germany. That acquisition is
on target to close at the end of this month. With these acquisitions, we now have the requisite mass in
place for printed circuit fabrication, card assembly and box build to attract large multinational
accounts. Our selling efforts will intensify with this key target group of customers. Furthermore, our
strategy of providing more value-added, integrated services is also paying dividends. We are currently
in active quotes with the highest number of companies in our history that are looking to the Dii Group
to provide a package of design and manufacturing services."
Thomas J. Smach, chief financial officer for the Dii Group, commented, "The Dii Group has the
financial strength to fund its growth. Our strong internal cash flows are sufficient to fund internal
growth, and we have access to external markets to fund expansion activity. In addition, we are
currently looking at several options to eliminate any nonperforming assets that remain in the business."
This press release contains historical information and forward-looking statements. Statements looking
forward in time involve risks and uncertainties, including risks associated with customer concentration,
dependence on the electronics industry, especially the semiconductor business sector, economic
conditions, the successful integration of newly acquired businesses and other risks associated with
acquisitions, changes in product mix, competition, and international operations. For further
information, reference should be made to the Dii Group's filings with the Securities and Exchange
Commission, including the Company's "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in the Company's most recent Annual Report on Form 10-K.
The Dii Group, Inc. (Nasdaq: DIIG) is a leading, value-added electronics design and manufacturing
outsource service provider, which operates through a global network of companies in North America,
Europe, and Asia. The Company serves the electronics industry through its four core competencies:
semiconductors; printed circuit boards; circuit board and finished product assembly and distribution;
and process control technologies. The Dii Group employs approximately 7,000 people and had
revenues of $457 million in the first half of fiscal 1998. Its Internet (Web) Site can be reached by
accessing "www.diigroup.com" to view recent press releases, company information, and financial data
relating to the Dii Group.
SOURCE The Dii Group
/CONTACT: Sharon L. Sweet, Vice President, Investor Relations of The Dii
Group, 303-652-2221/
/Web site: diigroup.com
(DIIG) |
