PECO II, Inc. First Quarter Results in Line with Revised Guidance

Company announces plan to align expenses with sales,

reduce non-strategic costs



Apr 25, 2001, 01:00 ET from PECO II, Inc.

    GALION, Ohio, April 25 /PRNewswire Interactive News Release/ --
 PECO II, Inc. (Nasdaq: PIII), a manufacturer of communications power systems
 and equipment and a related services provider to the communications industry,
 today reported flat sales and reduced earnings per diluted share for the first
 quarter ended March 31, 2001.  The Company also announced initiatives to align
 costs with sales by reducing work force levels and non-strategic costs.
     In keeping with guidance announced previously, PECO II reported sales of
 $34.9 million in the first quarter of 2001, compared with $35.0 million in the
 first quarter of 2000.
     Net income was a first-quarter record of $2.7 million, an increase of
 12 percent, compared with $2.4 million for the same quarter of 2000. Earnings
 per diluted share were $0.12, compared with the prior year's $0.15.
     Cash earnings per share, or earnings before stock compensation charges,
 net of taxes, for the first quarter of 2001 were $0.14 per diluted share,
 compared with $0.19 per diluted share for the comparable quarter in 2000.
     "There were a number of positive developments in the first quarter,
 including initial shipments to Genuity and Aerie Networks for DC power systems
 and value-added services," said Matthew Smith, president and chief executive
 officer. "In addition, we began production in our 144,000-square-foot addition
 at our Galion, Ohio, facility and prepared for the April opening of our
 regional operational center in the Denver area.  All in all, management's
 focus on profitability and asset management resulted in $6.6 million in
 operating cash flows in the first quarter. We have approximately $50 million
 in marketable securities and an unsecured $20 million credit line to sustain
 our growth."
     Smith added, "Unfortunately, as we announced previously, we experienced
 diminished demand from a number of our major communications customers during
 the first quarter, resulting in delivery push-outs.  The sharp economic
 slowdown in the United States has resulted in higher inventory levels at our
 customers and is the primary reason sales are flat compared with the first
 quarter of last year."
     In light of reduced and deferred spending by our customers, Smith said
 PECO II has taken actions to reduce non-strategic operating expenses and
 capital expenditures and will reduce its work force by 15 percent, including
 temporary and probationary associates.  The Company had 1,260 associates at
 March 31, 2001.
     "As a result of these initiatives," said Smith, "our current expectations
 are in line with our revised guidance provided on March 28 of full-year sales
 of $160 million to $175 million, with cash earnings between $0.65 and
 $0.75 per diluted share."
 
     Conference Call on the Web
     PECO II will hold a conference call with investors and analysts on
 Wednesday, April 25, 2001, at 10:00 a.m. Eastern Time.  The call will be
 available over the Internet at www.vcall.com and www.peco2.com . To listen to
 the call, go to either Web site to register, download and install any
 necessary audio software.  For those unable to listen to the live broadcast, a
 replay of the Webcast will be archived and available shortly after the call.
 
     About PECO II, Inc.
     PECO II, headquartered in Galion, Ohio, designs, manufactures and markets
 communications power systems, power distribution equipment, systems
 integration equipment and products, and other related support products and
 services.  As the largest independent provider of telecommunications power
 systems, the Company supports the power infrastructure needs of communications
 service providers in the local exchange, long-distance, wireless, broadband
 and Internet markets.  The Company generated revenues of $156.5 million in
 2000.  Additional information about PECO II can be found at www.peco2.com .
 
     Forward-Looking Statements
     Statements in this release that are not historical fact are forward-
 looking statements, which involve risks and uncertainties that may cause
 actual results or events to differ materially from those expressed or implied
 in such statements. Factors that may cause actual results to differ materially
 from those in the forward-looking statements include, but are not limited to,
 a general economic recession; a downturn in our principal customers'
 businesses; the growth in the communications industry; the ability to develop
 and market new products and product enhancements; the ability to attract and
 retain customers; competition and technological change; and successful
 implementation of the Company's business strategy.  Further information
 concerning issues that could materially affect financial performance related
 to forward-looking statements can be found in PECO II's periodic filings with
 the Securities and Exchange Commission.
 
                                 PECO II, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
 
                                                        Three months ended
                                                             March 31,
     In thousands, except per share data                2001          2000
                                                    (Unaudited)
 
     Net sales                                        $34,856        $34,964
     Cost of goods sold (excluding stock
       compensation charges)                           24,114         23,537
         Gross margin                                  10,742         11,427
     Operating expenses (excluding stock
       compensation charges):
       Research, development and engineering            2,263          2,389
       Selling, general and administrative              4,235          3,770
         Total                                          6,498          6,159
 
     Operating income before stock
       compensation charges                             4,244          5,268
     Stock compensation charges to be classified in:
       Cost of goods sold                                 137            299
       Research, development and engineering               77            177
       Selling, general and administrative                214            406
         Total                                            428            882
 
     Income from operations                             3,816          4,386
     Interest income (expense)                            584           (429)
     Income before income taxes                         4,400          3,957
     Provision for income taxes                         1,739          1,583
     Net income                                       $ 2,661         $2,374
     Income per common share:
       Basic                                           $ 0.13         $ 0.16
       Diluted                                         $ 0.12         $ 0.15
 
     Weighted average number of common shares:
       Basic                                           20,977         14,466
       Diluted                                         21,458         15,607
 
     Net income excluding stock compensation charges   $2,920         $2,903
     Cash earnings per common share excluding
       stock compensation charges:
       Basic                                            $0.14          $0.20
       Diluted                                          $0.14          $0.19
 
 
                                 PECO II, INC.
                          CONSOLIDATED BALANCE SHEETS
 
                                                    March 31,      December 31,
     In thousands                                      2001            2000
                                                   (Unaudited)
                           ASSETS
     Current assets:
       Cash and cash equivalents                      $50,811        $54,920
       Accounts receivable                             22,441         30,601
       Inventories                                     37,588         33,282
       Prepaid expenses and other current assets        1,123          1,194
       Prepaid and deferred income taxes                2,760          2,805
         Total current assets                         114,723        122,802
     Property and equipment, net                       35,420         25,293
     Other assets                                       5,666          6,051
     TOTAL ASSETS                                   $ 155,809      $ 154,146
 
                 LIABILITIES AND SHAREHOLDERS' EQUITY
 
     Current liabilities:
       Current portion of long-term debt and
         capital leases                                  $412           $434
       Accounts payable                                10,859         12,725
       Accrued compensation expense                     5,155          4,554
       Other accrued expenses                           4,632          5,113
       Accrued income taxes                             1,786          1,499
         Total current liabilities                     22,844         24,325
     Long-term liabilities:
       Borrowings under lines of credit                     8            375
       Long-term debt and capital leases                4,492          4,566
         Total long-term liabilities                    4,500          4,941
     Shareholders' equity:
       Common shares                                    2,668          2,655
       Additional paid-in capital                     100,712         99,801
       Retained earnings                               25,805         22,424
         Total shareholders' equity                   128,465        124,880
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $155,809       $154,146
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X21167748
 
 

SOURCE PECO II, Inc.
    GALION, Ohio, April 25 /PRNewswire Interactive News Release/ --
 PECO II, Inc. (Nasdaq: PIII), a manufacturer of communications power systems
 and equipment and a related services provider to the communications industry,
 today reported flat sales and reduced earnings per diluted share for the first
 quarter ended March 31, 2001.  The Company also announced initiatives to align
 costs with sales by reducing work force levels and non-strategic costs.
     In keeping with guidance announced previously, PECO II reported sales of
 $34.9 million in the first quarter of 2001, compared with $35.0 million in the
 first quarter of 2000.
     Net income was a first-quarter record of $2.7 million, an increase of
 12 percent, compared with $2.4 million for the same quarter of 2000. Earnings
 per diluted share were $0.12, compared with the prior year's $0.15.
     Cash earnings per share, or earnings before stock compensation charges,
 net of taxes, for the first quarter of 2001 were $0.14 per diluted share,
 compared with $0.19 per diluted share for the comparable quarter in 2000.
     "There were a number of positive developments in the first quarter,
 including initial shipments to Genuity and Aerie Networks for DC power systems
 and value-added services," said Matthew Smith, president and chief executive
 officer. "In addition, we began production in our 144,000-square-foot addition
 at our Galion, Ohio, facility and prepared for the April opening of our
 regional operational center in the Denver area.  All in all, management's
 focus on profitability and asset management resulted in $6.6 million in
 operating cash flows in the first quarter. We have approximately $50 million
 in marketable securities and an unsecured $20 million credit line to sustain
 our growth."
     Smith added, "Unfortunately, as we announced previously, we experienced
 diminished demand from a number of our major communications customers during
 the first quarter, resulting in delivery push-outs.  The sharp economic
 slowdown in the United States has resulted in higher inventory levels at our
 customers and is the primary reason sales are flat compared with the first
 quarter of last year."
     In light of reduced and deferred spending by our customers, Smith said
 PECO II has taken actions to reduce non-strategic operating expenses and
 capital expenditures and will reduce its work force by 15 percent, including
 temporary and probationary associates.  The Company had 1,260 associates at
 March 31, 2001.
     "As a result of these initiatives," said Smith, "our current expectations
 are in line with our revised guidance provided on March 28 of full-year sales
 of $160 million to $175 million, with cash earnings between $0.65 and
 $0.75 per diluted share."
 
     Conference Call on the Web
     PECO II will hold a conference call with investors and analysts on
 Wednesday, April 25, 2001, at 10:00 a.m. Eastern Time.  The call will be
 available over the Internet at www.vcall.com and www.peco2.com . To listen to
 the call, go to either Web site to register, download and install any
 necessary audio software.  For those unable to listen to the live broadcast, a
 replay of the Webcast will be archived and available shortly after the call.
 
     About PECO II, Inc.
     PECO II, headquartered in Galion, Ohio, designs, manufactures and markets
 communications power systems, power distribution equipment, systems
 integration equipment and products, and other related support products and
 services.  As the largest independent provider of telecommunications power
 systems, the Company supports the power infrastructure needs of communications
 service providers in the local exchange, long-distance, wireless, broadband
 and Internet markets.  The Company generated revenues of $156.5 million in
 2000.  Additional information about PECO II can be found at www.peco2.com .
 
     Forward-Looking Statements
     Statements in this release that are not historical fact are forward-
 looking statements, which involve risks and uncertainties that may cause
 actual results or events to differ materially from those expressed or implied
 in such statements. Factors that may cause actual results to differ materially
 from those in the forward-looking statements include, but are not limited to,
 a general economic recession; a downturn in our principal customers'
 businesses; the growth in the communications industry; the ability to develop
 and market new products and product enhancements; the ability to attract and
 retain customers; competition and technological change; and successful
 implementation of the Company's business strategy.  Further information
 concerning issues that could materially affect financial performance related
 to forward-looking statements can be found in PECO II's periodic filings with
 the Securities and Exchange Commission.
 
                                 PECO II, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
 
                                                        Three months ended
                                                             March 31,
     In thousands, except per share data                2001          2000
                                                    (Unaudited)
 
     Net sales                                        $34,856        $34,964
     Cost of goods sold (excluding stock
       compensation charges)                           24,114         23,537
         Gross margin                                  10,742         11,427
     Operating expenses (excluding stock
       compensation charges):
       Research, development and engineering            2,263          2,389
       Selling, general and administrative              4,235          3,770
         Total                                          6,498          6,159
 
     Operating income before stock
       compensation charges                             4,244          5,268
     Stock compensation charges to be classified in:
       Cost of goods sold                                 137            299
       Research, development and engineering               77            177
       Selling, general and administrative                214            406
         Total                                            428            882
 
     Income from operations                             3,816          4,386
     Interest income (expense)                            584           (429)
     Income before income taxes                         4,400          3,957
     Provision for income taxes                         1,739          1,583
     Net income                                       $ 2,661         $2,374
     Income per common share:
       Basic                                           $ 0.13         $ 0.16
       Diluted                                         $ 0.12         $ 0.15
 
     Weighted average number of common shares:
       Basic                                           20,977         14,466
       Diluted                                         21,458         15,607
 
     Net income excluding stock compensation charges   $2,920         $2,903
     Cash earnings per common share excluding
       stock compensation charges:
       Basic                                            $0.14          $0.20
       Diluted                                          $0.14          $0.19
 
 
                                 PECO II, INC.
                          CONSOLIDATED BALANCE SHEETS
 
                                                    March 31,      December 31,
     In thousands                                      2001            2000
                                                   (Unaudited)
                           ASSETS
     Current assets:
       Cash and cash equivalents                      $50,811        $54,920
       Accounts receivable                             22,441         30,601
       Inventories                                     37,588         33,282
       Prepaid expenses and other current assets        1,123          1,194
       Prepaid and deferred income taxes                2,760          2,805
         Total current assets                         114,723        122,802
     Property and equipment, net                       35,420         25,293
     Other assets                                       5,666          6,051
     TOTAL ASSETS                                   $ 155,809      $ 154,146
 
                 LIABILITIES AND SHAREHOLDERS' EQUITY
 
     Current liabilities:
       Current portion of long-term debt and
         capital leases                                  $412           $434
       Accounts payable                                10,859         12,725
       Accrued compensation expense                     5,155          4,554
       Other accrued expenses                           4,632          5,113
       Accrued income taxes                             1,786          1,499
         Total current liabilities                     22,844         24,325
     Long-term liabilities:
       Borrowings under lines of credit                     8            375
       Long-term debt and capital leases                4,492          4,566
         Total long-term liabilities                    4,500          4,941
     Shareholders' equity:
       Common shares                                    2,668          2,655
       Additional paid-in capital                     100,712         99,801
       Retained earnings                               25,805         22,424
         Total shareholders' equity                   128,465        124,880
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $155,809       $154,146
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X21167748
 
 SOURCE  PECO II, Inc.