JULY 25--Three-Five Systems Inc. (TFS; Tempe, AZ; www.threefive.com), an electronics manufacturing-services company with expertise in displays, delivered revenues of $46.8 million for the second quarter, ended June 30, 2003--an increase of 94% over the year ago quarter and an increase of 82% over the first quarter. The large revenue increase in the second quarter of 2003 was fueled principally by the company's organic growth in sales of display-oriented manufacturing services, especially in products containing color displays. Most of the color display products were shipped to European telecom-handset customers. The company also experienced strong growth in its module assembly and box build business based on revenues from its new customer Microtune and from its new Malaysian operations.
"This quarter marks a significant milestone for our company," said Jack Saltich, president and CEO of TFS. "We have achieved robust quarterly sales with an unprecedented level of diversity in customers and revenues base. In the second quarter, 11 customers contributed revenue in excess of $1 million, and our largest customer, which comprised about 21% of our business, is a new customer in the last seven months. In addition, although our two strongest markets continue to be computing and telecom, our sales were broadly distributed among consumer, industrial, medical, and automotive markets with key customers in each of those markets. Our sales were also well distributed geographically with approximately 53% of sales in North America, 23% of sales in Asia, and 24% of sales in Europe."
TFS recorded a net loss for the second quarter of 2003 of $4.9 million, or $0.23 per share, compared to a net loss of $0.31 per share one year ago and a net loss of $0.26 per share last quarter. The improvement over the first quarter was due largely to gross margin increases resulting from product mix and increased factory utilization.
Revenues for the microdisplay division for the second quarter of 2003 were $760,000 compared to $371,000 in the first quarter. The net loss for the microdisplay division for the second quarter of 2003 was $3.0 million compared to the $2.9 million loss in the first quarter.
TFS ended the quarter with $63.3 million in cash and liquid investments. Total operating cash outflow in the second quarter was $8.8 million and was due to the company's net cash loss combined with $3.7 million in working capital requirements to support the sharp increase in sales. In the second quarter, the company also incurred approximately $1.4 million in capital expenditures and $465,000 in net cash outflow related to the formation of the Malaysian manufacturing venture.
"Our plans to spin off our microdisplay division into a new public company called Brillian Corp. (www.brilliancorp.com) are progressing, and we estimate completion of that spin-off in September, although the timing will ultimately depend on SEC approval," continued Saltich, who will serve as chairman of the board of directors for Brillian Corp.
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