Ann Arbor, MI, May 16, 2003 Nematron Corporation (Amex: NMN), a leading producer of PC-based industrial control solutions, announced today its operating results for its first quarter ended March 31, 2003.Net loss for the first quarter 2003 was $800,000 ($0.05 per share) compared with a net loss of $193,000 ($0.01 per share) for the 1st quarter 2002. Revenue totaled $3,334,000 for the 1st quarter 2003, a decrease of 26.2% over the $4,519,000 in the year earlier period. The decrease in revenue for the current period resulted primarily from declines in sales of software licenses, system integration services and repair services, while sales of hardware-based products remained relatively constant.Gross profit margin for the 1st quarter 2003 decreased to 19.5% from 31.8% in the year earlier period resulting primarily from the effects of product mix as described above and from the effect of fixed costs on lower revenue totals.Software product development expenses decreased $145,000, or 76.4%, in the current quarter compared to the year earlier quarter resulting from a reduction in new development work and lower staff levels. Selling, general and administrative charges declined $83,000, or 6.4%, because of cost reduction initiatives over the last several quarters.Interest expense increased by $43,000 in the current quarter compared to the year earlier period resulting from higher average borrowing levels during the current quarter.The revenue decline, especially from higher margin products, contributed significantly to the loss, in spite of our success in reducing discretionary spending. Customer capital spending levels continue at historic lows in spite of the significant benefits that our control products bring to the factory floor, said Matt Galvez, President and CEO. Mr. Galvez further stated, We remain committed to expanding our product offering, reducing costs to market and reducing administrative expenses. Our engineering staff has been successful in designing and releasing low-cost and feature-rich products right for the controls marketplace in order that the Company can make significant improvements in revenue levels and operating results when the market emerges from its depressed levels. Additionally, we have been working diligently on improving our distribution network in anticipation of an increase in market demand for control products and services.The discussion in this news release includes forward-looking statements based on current management expectations. Factors that could cause future results to differ from these expectations include: a change in general economic conditions, competitive factors (such as the introduction or enhancements of competitive products and pricing pressures), reductions in product demand, changes in customer requirements, component price increases, product introduction delays, latent deficiencies in new products, and additional factors described in the Companys reports filed with the SEC.Nematron Corporation has been setting the standard for PC-based control and Operator Interface since the birth of the industry. Nematron introduced the first industrial control computers, the first Windows NT/2000 based real-time control software and holds numerous patents on advanced control and information system components. As the only company that manufactures a full line of embedded or open architecture control solutions, Nematron continues to prosper by satisfying customers in nearly every automated industry. For additional information about Nematron products and our world-class customer service visit www.nematron.com.Operations Data: (Dollars in thousands) Three Months Ended March 31, 2003 2002 % ChangeNet revenues $3,334 $4,519 (26.2)%Cost of revenues 2,684 3,083 (12.9)Gross profit 650 1,436 (54.8) Gross margin 19.5% 31.8% (38.7)Operating expenses:Product development costs 45 190 (76.4)Selling, general and administrative 1,204 1,286 (6.4) 1,249 1,476 (15.5)Operating loss (599) (40) Interest (206) (163) 26.1Other, net 5 10 (55.9)Loss before taxes (800) (193) 314.4Tax benefit - - Net loss $(800) $(193) 314.4EBITDA (Earnings (loss) before interest, taxes, depreciation & amortization) $(442) $213 (307.5)Basic and diluted:Loss per share $(0.05) $(0.01) (85.7)Weighted average shares outstanding 15,745 15,745
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