##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    Annual report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934
 For
the fiscal year ended December 31, 2006
 Commission file number 0-49651
 SUNTRON CORPORATION
  Delaware
    
    86-1038668(State of Incorporation)
    
    (I.R.S. Employer Identification No.)2401 West Grandview Road, Phoenix, Arizona
    
    85023(Address of Principal Executive Offices)
    
    (Zip Code)
 (602) 789-6600  (Registrants telephone number, including area code)
 None
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $0.01 par value
    
    Nasdaq SmallCap Market
 o þ
 o þ
 þ o
   o o þ
 o þ
 $4.0 million
 February 28, 2007 27,577,282
 Documents Incorporated by Reference




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##### 



SUNTRON CORPORATION
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
 PART I1. Business
    
    
    31A. Risk Factors
    
    
    51B. Unresolved Staff Comments
    
    
    122. Properties
    
    
    123. Legal Proceedings
    
    
    134. Submission of Matters to a Vote of Security Holders
    
    
    13PART II5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    146. Selected Financial Data
    
    
    167. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    187A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    318. Financial Statements and Supplementary Data
    
    
    319. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
    
    
    329A. Controls and Procedures
    
    
    329B. Other Information
    
    
    32PART III10. Directors, Executive Officers and Corporate Governance
    
    
    3311. Executive Compensation
    
    
    3312. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    3313. Certain Relationships and Related Transactions
    
    
    3314. Principal Accountant Fees and Services
    
    
    33PART IV15. Exhibits and Financial Statement Schedules
    
    
    34Signatures
    
    
    36Index to Consolidated Financial Statements and Schedule
    
    
    F-1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2
  Statement Regarding Forward-Looking Statements
 This report on Form 10-K contains forward-looking statements regarding future events,
including our future financial and operational performance. Forward-looking statements include
statements regarding markets for our products; trends in net sales, gross profits, and estimated
expense levels; liquidity, anticipated cash needs and borrowing availability; and any statement
that contains the words anticipate, believe, plan, estimate, expect, seek, and other
similar expressions. The forward-looking statements included in this report reflect our current
expectations and beliefs, and we do not undertake publicly to update or revise these statements,
even if experience or future changes make it clear that any projected results expressed in this
report, annual or quarterly reports to stockholders, press releases, or company statements will
not be realized. In addition, the inclusion of any statement in this report does not constitute
an admission by us that the events or circumstances described in such statement are material.
Furthermore, we wish to caution and advise readers that these statements are based on
assumptions that may not materialize and may involve risks and uncertainties, many of which are
beyond our control, that could cause actual events or performance to differ materially from
those contained or implied in these forward-looking statements. These risks and uncertainties
include, but are not limited to, risks related to the realization of anticipated revenue and
profitability; the ability to meet cost estimates and achieve the expected benefits associated
with recent restructuring activities; trends affecting our growth; and the business and economic
risks described herein under Item 1A, Risk Factors.




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##### Table of Contents



PART I
 
 ITEM 1. BUSINESS
 Overview
  Our Services
 Design and Engineering Services
 Prototype Manufacturing Services
 Materials and Supply Chain Management Services
 Manufacturing and Assembly Services
 2




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Testing Services
 Quality Control Services
 After-market Repair Services
 Customers
  2004
    
    2005
    
    2006Industrial
    
    
    25
    %
    
    
    29
    %
    
    
    40
    %Semiconductor capital equipment
    
    
    39
    %
    
    
    22
    %
    
    
    31
    %Aerospace and defense
    
    
    24
    %
    
    
    30
    %
    
    
    20
    %Networking and telecommunications
    
    
    9
    %
    
    
    15
    %
    
    
    5
    %Medical equipment
    
    
    3
    %
    
    
    4
    %
    
    
    4
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Sales and Marketing
     Backlog
  3




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Suppliers
  Competition
  Governmental Regulation
    Employees
  Availability of Reports Filed with the Securities and Exchange Commission
  4




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ITEM 1A. RISK FACTORS
 An investment in our common stock involves a high degree of risk. When evaluating an
investment in our common stock, the factors described below should be carefully considered. If
any of the events described below occur, our business, financial condition, and results of
operations could deteriorate, the trading price of our common stock could fall, and you could
lose all or part of the money you paid for our common stock. In addition, the following factors
could cause our actual results to differ materially from those projected in our forward-looking
statements, whether made in this Form 10-K, our annual or quarterly reports to stockholders,
future press releases, other SEC filings, or orally, whether in presentations, responses to
questions, or otherwise. See Statement Regarding Forward-Looking Statements.
 Our level of indebtedness could adversely affect our financial viability, and the restrictions
imposed by the terms of our debt instruments may severely limit our ability to plan for or
respond to changes in our business.
   
    
    require us to dedicate a substantial portion of our cash flow from
operations to service interest and principal repayment requirements, limiting
the availability of cash for other purposes;
    
    increase our vulnerability to adverse general economic conditions by making
it more difficult to borrow additional funds to maintain our operations if our
revenues decrease;
    
    limit our ability to attract new customers if we do not have sufficient
liquidity to meet working capital needs; and
    
    hinder our flexibility in planning for, or reacting to, changes in our
business and industry if we are unable to borrow additional funds to upgrade
our equipment or facilities.
 We may need additional capital in the future and it may not be available on acceptable terms, or
at all.
  
    
    to fund working capital requirements for future growth that we may experience;
    
    to fund severance, lease exit, and other costs associated with restructuring efforts;
    
    to enhance or expand the range of services we offer, including required
capital equipment needs;
    
    to increase our promotional and marketing activities; or
    
    to respond to competitive pressures or perceived opportunities, such as
investment, acquisition, and international expansion activities.
  5




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We experience significant volatility in our net sales, which leads to significant operating
inefficiencies and the potential for significant charges.
   We are dependent upon the highly competitive electronics industry, and excess capacity or
decreased demand for products produced by this industry could result in increased price
competition as well as a decrease in our gross margins and unit volume sales.
   6
    Table of Contents    We are dependent upon a small number of customers for a large portion of our net sales, and a
decline in sales to major customers could harm our results of operations.
    Our customers may cancel their orders, change production quantities, or delay production.
   If we are unable to respond to rapid technological change and process development, we may not be
able to compete effectively.
  7




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Operating in foreign countries exposes us to increased risks that could adversely affect our
results of operations.
  
    
    economic or political instability;
    
    transportation delays and interruptions;
    
    increased employee turnover and labor unrest;
    
    incompatibility of systems and equipment used in foreign operations;
    
    foreign currency exposure;
    
    difficulties in staffing and managing foreign personnel and diverse cultures; and
    
    less developed infrastructures.
  If we are unsuccessful in managing future opportunities for growth, our results of operations
could be harmed.
  Our results of operations are affected by a variety of factors, which could cause our results of
operations to fail to meet expectations.
  
    
    timing of orders from and shipments to major customers;
    
    mix of products ordered by major customers;
    
    volume of orders as related to our capacity at individual locations;
    
    pricing and other competitive pressures;
    
    component shortages, which could cause us to be unable to meet customer
 8




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delivery schedules;
    
    our ability to minimize excess and obsolete inventory exposure;
    
    our ability to manage the risks associated with uncollectible accounts receivable;
    
    our ability to manage effectively inventory and fixed asset levels;
    
    Changing environmental laws affecting component chemistry and process
changes needed to meet these new requirements; and
    
    timing and level of goodwill and other long-lived asset impairments.
 We are dependent on limited and sole source suppliers for electronic components and may
experience component shortages, which could cause us to delay shipments to customers.
  We depend on our key personnel and may have difficulty attracting and retaining skilled
employees.
  Our manufacturing processes depend on the collective EMS industry experience of our employees.
If these employees were to leave and take this knowledge with them, our manufacturing processes
may suffer and we may not be able to compete effectively.
  Our failure to comply with the requirements of environmental laws could result in fines and
revocation of permits necessary to our manufacturing processes.
 9
    Table of Contents     We may be subject to risks associated with acquisitions, and these risks could harm our results
of operations.
    
    
    the business fails to achieve anticipated revenue and profit expectations;
    
    the potential inability to successfully integrate acquired operations and
businesses or to realize anticipated synergies, economies of scale, or other
value;
    
    diversion of managements attention;
    
    difficulties in scaling up production and coordinating management of
operations at new sites;
    
    the possible need to restructure, modify, or terminate customer
relationships of the acquired business;
    
    loss of key employees of acquired operations; and
    
    the potential liabilities of the acquired businesses.
 10
    Table of Contents    Failure to maintain an effective system of internal controls in accordance with Section 404 of
the Sarbanes-Oxley Act could inhibit our ability to accurately report our financial results and
have a material adverse impact on our business and stock price.
  Our stock is traded on the Nasdaq SmallCap Market and if we are unable to sustain compliance
with their listing requirements this could adversely impact our ability to use the capital
markets to raise additional capital and our stockholders may be unable to efficiently sell their
shares of our common stock.
  Our stock price may be volatile, and our stock is thinly traded, which could cause investors to
lose all or part of their investments in our common stock.
    
    
    announcements about the financial performance and prospects of the
industries and customers we serve;
    
    announcements about the financial performance of our competitors in the EMS
industry;
    
    the timing of announcements by us or our competitors of significant
contracts or acquisitions;
    
    failure to meet the performance estimates of securities analysts;
    
    changes in estimates of our results of operations by securities analysts; and
    
    general stock market conditions.
 11




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Our major stockholder controls us and our stock price could be influenced by actions taken by
this stockholder. Additionally, this stockholder could prevent a change of control or other
business combination, or could effect a short form merger without the approval of other
stockholders.
   
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  Year Acquired/
    
    Approximate Size
    
    Owned/Location
    
    Opened
    
    (Square Feet)
    
    Leased
    
    Primary UseSugar Land, Texas (1)
    
    
    2000
    
    
    
    248,000
    
    
    Leased
    
    ManufacturingPhoenix, Arizona
    
    
    1999
    
    
    
    99,000
    
    
    Leased
    
    Manufacturing/HeadquartersNewberg, Oregon
    
    
    1998
    
    
    
    65,000
    
    
    Leased
    
    ManufacturingTijuana, Mexico
    
    
    2005
    
    
    
    78,000
    
    
    Leased
    
    ManufacturingManchester, New Hampshire
    
    
    1998
    
    
    
    23,000
    
    
    Leased
    
    ManufacturingLawrence, Massachusetts (2)
    
    
    2001
    
    
    
    73,000
    
    
    Leased
    
    Manufacturing
 
 (1)
    
    On March 30, 2006, we sold our building, which consisted of 488,000 square
feet, and subsequently leased back from an unrelated party approximately 223,000 square
feet of the facility under a seven-year lease and 25,000 square feet under a one-year
lease (expiring on March 31, 2007).(2)
    
    Effective March 29, 2007, we entered into an amendment to the lease for our
Lawrence, Massachusetts facility which reduced our square footage from 73,000 to 17,000.
As consideration for the amendment, we agreed to pay approximately $1.1 million in March
2007 and the remaining rent payments under the lease decreased in proportion to the
reduction in square footage.  12




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ITEM 3. LEGAL PROCEEDINGS
 Suntron Corporation and Suntron GCO, L.P. v. Applied Materials, Inc.
 Applied Materials, Inc. v. Suntron Corporation
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Name
    
    For
    
    
    WithholdIvor J. Evans
    
    
    27,155,130
    
    
    
    187,458Douglas P. McCormick
    
    
    27,154,152
    
    
    
    188,436Marc T. Schölvinck
    
    
    27,121,494
    
    
    
    221,094
 13




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
 Market for Our Common Stock
  Fiscal Quarter Ended
    
    Low
    
    HighApril 3, 2005
    
    $
    1.96
    
    
    $
    3.33July 3, 2005
    
    $
    1.00
    
    
    $
    2.10October 2, 2005
    
    $
    1.04
    
    
    $
    1.69December 31, 2005
    
    $
    1.05
    
    
    $
    1.35April 2, 2006
    
    $
    1.16
    
    
    $
    2.90July 2, 2006
    
    $
    1.44
    
    
    $
    2.42October 1, 2006
    
    $
    1.11
    
    
    $
    1.79December 31, 2006
    
    $
    1.01
    
    
    $
    1.63
  Performance Graph
  
    
    the Nasdaq Composite Index; and
    
    a peer group consisting of us and six other publicly traded electronic
manufacturing services companies that we have selected.
  14




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COMPARISON OF 58 MONTH CUMULATIVE TOTAL RETURN*
 
 
 *
    
    $100 invested on 3/1/02 including reinvestment of dividends,
as applicable.
Fiscal year ending December 31. Dividends
  15




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ITEM 6. SELECTED FINANCIAL DATA
  Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(In thousands, except per share amounts)Statement of Operations Data:Net sales
    
    $
    370,797
    
    
    $
    313,231
    
    
    $
    475,388
    
    
    $
    328,730
    
    
    $
    320,786Cost of goods sold
    
    
    398,767
    
    
    
    321,599
    
    
    
    449,516
    
    
    
    311,894
    
    
    
    302,673Gross profit (loss)
    
    
    (27,970
    )
    
    
    (8,368
    )
    
    
    25,872
    
    
    
    16,836
    
    
    
    18,113Operating Expenses:Selling, general, and administrative expenses
    
    
    27,234
    
    
    
    22,648
    
    
    
    24,361
    
    
    
    22,758
    
    
    
    22,815Severance, retention, and lease exit costs
    
    
    169
    
    
    
    124
    
    
    
    1,085
    
    
    
    869
    
    
    
    619Reorganization transaction costs
    
    
    312
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Related party management and consulting fees
    
    
    835
    
    
    
    750
    
    
    
    750
    
    
    
    750
    
    
    
    750Impairment of long-lived assets
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating loss
    
    
    (56,541
    )
    
    
    (31,890
    )
    
    
    (324
    )
    
    
    (7,541
    )
    
    
    (6,071
    )Interest expense
    
    
    (2,568
    )
    
    
    (2,696
    )
    
    
    (3,982
    )
    
    
    (4,703
    )
    
    
    (5,936
    )Reduction in interest due to settlement of
dispute
    
    
    1,029
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain (loss) on sale of assets, net
    
    
    (166
    )
    
    
    50
    
    
    
    (11
    )
    
    
    695
    
    
    
    25Other, net
    
    
    835
    
    
    
    248
    
    
    
    (140
    )
    
    
    207
    
    
    
    103Loss before income taxes and cumulative
effect of change in accounting principle
    
    
    (57,411
    )
    
    
    (34,288
    )
    
    
    (4,457
    )
    
    
    (11,342
    )
    
    
    (11,879
    )Income tax benefit
    
    
    276
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss before cumulative effect of change in
accounting principle
    
    
    (57,135
    )
    
    
    (34,288
    )
    
    
    (4,457
    )
    
    
    (11,342
    )
    
    
    (11,879
    )Cumulative effect of change in accounting
principle
    
    
    (69,015
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (126,150
    )
    
    $
    (34,288
    )
    
    $
    (4,457
    )
    
    $
    (11,342
    )
    
    $
    (11,879
    )Net loss per share  Basic and Diluted:Loss before cumulative effect of
change in accounting principle
    
    $
    (2.08
    )
    
    $
    (1.25
    )
    
    $
    (0.16
    )
    
    $
    (0.41
    )
    
    $
    (0.43
    )Cumulative effect of change in accounting
principle
    
    
    (2.52
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss per share  Basic and Diluted
    
    $
    (4.60
    )
    
    $
    (1.25
    )
    
    $
    (0.16
    )
    
    $
    (0.41
    )
    
    $
    (0.43
    )Weighted average shares outstanding -
Basic and Diluted
    
    
    27,409
    
    
    
    27,409
    
    
    
    27,413
    
    
    
    27,415
    
    
    
    27,525
 16




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Year Ended December 31,2002
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2006(In thousands)Other Operating Data:Computation of EBITDA (a)(b)Loss before cumulative effect of change in
accounting principle
    
    $
    (57,135
    )
    
    $
    (34,288
    )
    
    $
    (4,457
    )
    
    $
    (11,342
    )
    
    $
    (11,879
    )Income tax benefit
    
    
    (276
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    2,568
    
    
    
    2,696
    
    
    
    3,982
    
    
    
    4,703
    
    
    
    5,936Reduction in interest under settlement
    
    
    (1,029
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization expense
    
    
    21,987
    
    
    
    22,133
    
    
    
    11,199
    
    
    
    7,809
    
    
    
    4,597EBITDA (a)(b)
    
    $
    (33,885
    )
    
    $
    (9,459
    )
    
    $
    10,724
    
    
    $
    1,170
    
    
    $
    (1,346
    )Cash Flow Data:Cash provided by (used in):Operating activities
    
    $
    22,779
    
    
    $
    (19,768
    )
    
    $
    (22,774
    )
    
    $
    16,500
    
    
    $
    1,089Investing activities
    
    
    (7,779
    )
    
    
    (2,805
    )
    
    
    (4,521
    )
    
    
    (59
    )
    
    
    16,342Financing activities
    
    
    (27,551
    )
    
    
    20,978
    
    
    
    27,283
    
    
    
    (16,396
    )
    
    
    (17,444
    )
 December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006(In thousands)Balance Sheet Data:Total assets
    
    $
    172,216
    
    
    $
    154,646
    
    
    $
    180,109
    
    
    $
    155,349
    
    
    $
    116,913Total debt
    
    
    10,856
    
    
    
    34,011
    
    
    
    59,128
    
    
    
    47,000
    
    
    
    31,113Total stockholders equity
    
    
    104,011
    
    
    
    69,949
    
    
    
    65,814
    
    
    
    54,568
    
    
    
    43,552Total invested capital (c)
    
    
    114,867
    
    
    
    103,960
    
    
    
    124,942
    
    
    
    101,568
    
    
    
    74,665Liquidity Data:Working capital (d)
    
    $
    50,372
    
    
    $
    49,378
    
    
    $
    17,153
    
    
    $
    33,869
    
    
    $
    37,773
 
 (a)
    
    Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) is
presented because we believe it is an indicator of our ability to incur and service debt
and to fund capital expenditures. An EBITDA-based calculation is also used by our
lenders in determining compliance with certain financial covenants.(b)
    
    The primary measure of operating performance is net income (loss). EBITDA should
not be construed as an alternative to net income (loss), determined in accordance with
U.S. generally accepted accounting principles, or GAAP, as an indicator of operating
performance, as a measure of liquidity or as an alternative to cash flows from operating
activities determined in accordance with GAAP. We believe the presentation of these
additional financial performance indicators is beneficial to investors since they provide
an additional perspective from which to evaluate our company. However, in evaluating
alternative measures of operating performance, it is important to understand that there
are no standards for these calculations. Accordingly, the lack of standards can result in
subjective determinations by management about which items may be excluded from the
calculations, as well as the potential for inconsistencies between different companies
that have similarly titled alternative measures. For example, as discussed in greater
detail under Managements Discussion and Analysis of Financial Condition and Results of
Operations of this Report on Form 10-K, the calculation of EBITDA in our credit agreement
with US Bank is different than the calculation of EBITDA shown above.(c)
    
    Total invested capital represents total debt plus total stockholders equity.(d)
    
    Working capital represents total current assets less total current liabilities.
Beginning in 2004, the principal balance under our revolving credit agreement is included
in current liabilities due to the existence of a lockbox requirement in the credit
agreement. 17




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 The following discussion of our financial condition and results of operations should
be read in conjunction with our consolidated financial statements and the related notes, and the
other financial information included in this report. This discussion and analysis contains
forward-looking statements that involve risks and uncertainties. Our actual results may differ
materially from those results anticipated in these forward-looking statements as a result of
certain factors, including those set forth in Part 1, Item 1A, Risk Factors and elsewhere in
this report.
 Overview
   
    
    On March 30, 2006, we sold our building and land in Sugar Land, Texas, which
generated net proceeds of approximately $16.7 million that we used to repay
outstanding debt. On April 11, 2006, the sale of an adjacent land parcel was
completed, which generated additional net proceeds of approximately $1.4 million. We
leased back approximately half of the building under a seven-year lease to continue
our manufacturing operations at that location. In addition to the benefit from
eliminating future interest cost due to the repayment of debt, we also eliminated
fixed overhead costs for real estate taxes, insurance and utilities related to the
portion of the building that was not leased back.
    
    On March 30, 2006, we entered into a new three-year senior credit facility with US
Bank that permits borrowings of up to $50.0 million which matures in March 2009. As of
December 31, 2006, the principal balance outstanding was approximately $19.8 million
and we had unused borrowing availability of approximately $18.4 million.
    
    On March 30, 2006, we borrowed $10.0 million of subordinated debt from an affiliate
of our majority stockholder. In addition, the affiliate agreed to make additional
subordinated loans of up to $5.0 million if our operating performance results in a
failure to comply with the fixed charge coverage (FCC) ratio covenant in our new
credit facility. The outstanding principal balance bears interest at an effective rate
of 16.9% with interest payable in kind, which results in accrued interest being added
to the principal balance each quarter. This debt matures in May 2009 and if additional
subordinated loans are required to comply with the FCC ratio, the interest rate will
not exceed 18.0%.
    
    During 2006, we further improved plant capacity utilization and the elimination of
fixed overhead costs through the closure of business units in Lawrence, Massachusetts
and Olathe, Kansas. On March 29, 2007, we amended our lease in Lawrence, Massachusetts
whereby future rental payments of approximately $2.1 million were eliminated in
exchange for a cash payment of approximately $1.1 million.
    
    In November 2006, we executed an agreement with Applied Materials that resulted in
the termination of litigation that was initiated in 2004. In 2005 and 2006, we
incurred substantial costs related to this litigation and the settlement resulted in
the elimination of these costs beginning in December 2006.
    
    In February 2007, we sold our business unit located in Garner, Iowa for a selling
price of approximately $4.8 million, resulting in a gain on sale of approximately $0.5
million.
 18
    Table of Contents     Caption
    
    OverviewInformation About Our Business
    
    Under this section we provide
information to help understand our
industry conditions and information
unique to our business and customer
relationships.Critical Accounting Policies and
Estimates
    
    This section provides details about
some of the critical estimates and
accounting policies that must be
applied in the preparation of our
financial statements. It is
important to understand the nature
of key uncertainties and estimates
that may not be apparent solely
from reading our financial
statements and the related
footnotes.Overview of Statement of Operations
    
    This section includes a description
of the types of transactions that
are included in each significant
category included in our statement
of operations.Results of Operations
    
    This section includes a discussion
and analysis of our operating
results for 2005 compared to 2006.
This section also contains a
similar discussion and analysis of
our operating results for 2004
compared to 2005.Liquidity and Capital Resources
    
    There are several sub-captions
under this section, including a
discussion of our cash flows for
2006 and other liquidity measures
that we consider important to our
business. Under the sub-caption for
Contractual Obligations, we
discuss on- and off-balance-sheet
obligations and the expected impact
on our liquidity. Under the
sub-caption for Capital
Resources, we have included a
discussion of our debt agreements,
including details about interest
rates charged, calculation of the
borrowing base and unused
availability, compliance with the
financial covenant in our debt
agreement, and the impact of recent
actions to sell assets and enter
into new debt agreements.
 Information About Our Business
   19




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##### Table of Contents



Critical Accounting Policies and Estimates
  Revenue Recognition.
 20




---



##### Table of Contents



Revenue Arrangements with Multiple Deliverables,
  Write-Downs for Obsolete and Slow-Moving Inventories.
   Allowance for Doubtful Accounts Receivable.
 Restructuring Activities and Asset Impairments.
 21




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##### Table of Contents



Overview of Statement of Operations
 Net sales
 Cost of goods sold
 Selling, general, and administrative expenses
 Severance, retention, and lease exit costs
 Related party management and consulting fees
 Interest expense
 Gain (loss) on sale of assets
 22




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##### Table of Contents



Results of Operations
  2004
    
    2005
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of goods sold
    
    
    94.6
    %
    
    
    94.9
    %
    
    
    94.4
    %Gross profit
    
    
    5.4
    %
    
    
    5.1
    %
    
    
    5.6
    %Operating expenses:Selling, general, and administrative expenses
    
    
    5.1
    %
    
    
    6.9
    %
    
    
    7.1
    %Severance, retention, and lease exit costs
    
    
    0.2
    %
    
    
    0.3
    %
    
    
    0.2
    %Related party management and consulting fees
    
    
    0.2
    %
    
    
    0.2
    %
    
    
    0.2
    %Operating loss
    
    
    (0.1
    )%
    
    
    (2.3
    )%
    
    
    (1.9
    )%
 Comparison of Years Ended December 31, 2005 and 2006
 Net Sales.
    Gross Profit.
 23
    Table of Contents      Selling, General, and Administrative Expenses.
  Severance, Retention, and Lease Exit Costs.
 Interest Expense.
 24




---



##### Table of Contents



Gain (Loss) on Sale of Assets.
 Comparison of Years Ended December 31, 2004 and 2005
 Net Sales.
   Gross Profit.
    Selling, General, and Administrative Expenses.
 25




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##### Table of Contents



Severance, Retention, and Lease Exit Costs.
 Interest Expense.
 Gain (Loss) on Sale of Assets.
 Unrealized Loss on Marketable Securities.
 Liquidity and Capital Resources
 Cash Flows from Operating Activities.
    26




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##### Table of Contents



Cash Flows from Investing Activities.
   Cash Flows from Financing Activities.
  Contractual Obligations.
 Debt
    
    
    Operating
    
    
    PurchaseAgreements(1)
    
    
    Leases (2)
    
    
    Obligations (3)
    
    
    Other (4)
    
    
    Total(Dollars in Table are in Millions)Year ending December 31:2007
    
    $
    21.8
    
    
    $
    5.1
    
    
    $
    35.5
    
    
    $
    0.3
    
    
    $
    62.72008
    
    
    
    
    
    
    3.8
    
    
    
    
    
    
    
    0.2
    
    
    
    4.02009
    
    
    11.4
    
    
    
    3.3
    
    
    
    
    
    
    
    
    
    
    
    14.72010
    
    
    
    
    
    
    2.9
    
    
    
    
    
    
    
    
    
    
    
    2.92011
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    
    
    
    
    2.3After 2011
    
    
    
    
    
    
    2.3
    
    
    
    
    
    
    
    
    
    
    
    2.3$
    33.2
    
    
    $
    19.7
    
    
    $
    35.5
    
    
    $
    0.5
    
    
    $
    88.9
 
 (1)
    
    Includes outstanding letters of credit of $2.0 million and outstanding borrowings
under our US Bank revolving credit agreement of $19.8 million. The US Bank senior credit
agreement expires in March 2009, but all borrowings are classified as current liabilities
due to the lenders requirement for a lockbox 27




---



##### Table of Contents



arrangement. Also includes $11.4 million of principal plus accrued interest that is
payable-in-kind under a subordinated loan from an affiliate of our majority stockholder
that is due in May 2009.(2)
    
    Includes an aggregate of $0.5 million, which has been included in the
determination of our liability for lease exit costs that is recorded in our consolidated
balance sheet at December 31, 2006. U.S. generally accepted accounting principles require
that we record a liability for future lease payments, net of estimated sublease rentals,
for facilities that we have exited. Also includes an aggregate of $2.1 million that was
eliminated in March 2007 in consideration of a cash payment of $1.1 million related to the
amendment of the lease for our Lawrence, Massachusetts facility.(3)
    
    Consists of obligations under outstanding purchase orders. Approximately 86% of
the deliveries under outstanding purchase orders are expected to be received in the first
quarter of 2007. We often have the ability to cancel these obligations if we provide
sufficient notice to our suppliers.(4)
    
    Consists of $0.5 million payable under agreements for the acquisition of
manufacturing equipment and software licenses.  Capital Resources.
 Sale of Sugar Land Real Estate.
  Revolving Credit Agreement.
 28




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##### Table of Contents



Second Lien Financing.
  29




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##### Table of Contents



EBITDA Alternative Performance Measure.
 2005
    
    
    2006(Dollars in Millions)Net loss
    
    $
    (11.3
    )
    
    $
    (11.9
    )Interest expense
    
    
    4.7
    
    
    
    5.9Income tax expense
    
    
    
    
    
    
    Depreciation and amortization
    
    
    7.8
    
    
    
    4.6EBITDA per traditional definition
    
    
    1.2
    
    
    
    (1.4
    )Restructuring costs (A)
    
    
    1.7
    
    
    
    3.5Other charges (B)
    
    
    1.4
    
    
    
    3.9EBITDA per credit agreement definitions
    
    $
    4.3
    
    
    $
    6.0
 
 (A)
    
    Restructuring costs include lease exit costs, impairment of long-lived assets,
and severance, retention, and moving costs related to facility closures and other
reductions in workforce. For 2005, approximately $0.4 million of restructuring costs
were incurred but are not included in the calculation above since they exceeded the
amount permitted under the previous credit agreement.(B)
    
    Includes stock-based compensation expense, net gains from disposition of
capital assets, and charges related to outstanding litigation related to termination of
our business relationship with Applied Materials. 30




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##### Table of Contents



Impact of Recently Issued Accounting Standards
 Accounting for Uncertainty in Income Taxes
  Fair
Value Measurements.
 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements.
 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  31




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
   
 ITEM 9B. OTHER INFORMATION
  32




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  33




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Financial Statements and Financial Statement Schedule
 (1)
    
    Financial Statements are listed in the Index to Financial Statements on page
F-1 of this Report.(2)
    
    Schedule II is listed in the Index to Financial Statements on page F-1 of this
Report. Other schedules are omitted because they are not applicable, not required, or
because required information is included in the consolidated financial statements or
notes thereto.
 (b)
    
    Exhibits
 ExhibitNumber
    
    Description2.1
    
    Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2001, by and among EFTC Corporation, K*TEC Electronics
Holding Corporation, Thayer-Blum Funding II, L.L.C. and the registrant. (1)3.1
    
    Certificate of Incorporation of the registrant. (1)3.2
    
    Bylaws of the registrant. (1)4.1
    
    Specimen Stock Certificate. (1)10.1
    
    Suntron Corporation Amended and Restated 2002 Stock Option Plan. (3)10.2
    
    Registration Rights Agreement between the registrant and Thayer-Blum. (1)10.3
    
    Lease Agreement dated as of May 10, 1999 by and between Orsett/I-17 L.L.C. and EFTC Corporation. (1)10.4
    
    Industrial Lease dated December 18, 1998 by and between Buckhorn Trading Co., LLC and EFTC Corporation. (1)10.5
    
    Commercial/Industrial Lease dated as of April 1, 2001 by and between EFTC Corporation and H. J. Brooks, LLC. (1)10.6
    
    Management and Consulting Agreement by and between Suntron Corporation and Thayer-Blum Funding III, L.L.C. (2)10.7
    
    Amended and Restated Employment agreement between Suntron and Hargopal (Paul) Singh (5)10.8
    
    Form of Change of Control Severance Agreement between Suntron Corporation and certain executives (4)10.9
    
    Earnest Money Contract dated effective as of December 27, 2005 by and between Suntron GCO, LP and GSL Industrial Partners,
L.P. (4)10.10
    
    First Letter Agreement to Earnest Money Contract dated as February 2, 2006 (4)10.11
    
    Second Letter Agreement to Earnest Money Contract dated as of March 8, 2006 (4)10.12
    
    Third Letter Agreement to Earnest Money Contract dated as of March 17, 2006 (4)10.13
    
    Fourth Letter Agreement to Earnest Money Contract dated as of March 22, 2006 (4)10.14
    
    Assignment of Earnest Money Contract dated as of March 21, 2006 between Suntron GCO, LP and GSL Industrial Partners, L.P. (4)10.15
    
    Triple Net Industrial Lease dated effective as of March 30, 2006 by and between Suntron GCO, LP and GSL 16/VIF Gillingham,
L.P. (4)10.16
    
    Financing Agreement dated as of March 28, 2006 by and between Suntron Corporation and U.S. Bank National Association (4)
 34




---



##### Table of Contents



ExhibitNumber
    
    Description10.17
    
    Note Purchase Agreement dated as of March 28, 2006 by and between Suntron Corporation and Thayer Equity Investors IV, L.P.
(4)10.18
    
    Maintenance Agreement dated as of March 28, 2006 by and between Suntron Corporation and Thayer Equity Investors IV, L.P. (4)21
    
    List of Subsidiaries of the registrant. (6)23.1
    
    Consent of KPMG LLP (7)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002. (7)31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (7)32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (7)32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (7)
 
 (1)
    
    Incorporated by reference to the Registration Statement on Form S-4 (Registration No. 333-72992) declared effective February
8, 2002.(2)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed on August 14, 2002.(3)
    
    Incorporated by reference to our 2002 Annual Report on Form 10-K filed on April 15, 2003.(4)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed on May 17, 2006.(5)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed on August 14, 2006.(6)
    
    Incorporated by reference to our 2005 Annual Report on Form 10-K filed on March 31, 2006.(7)
    
    Filed herewith. 35




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##### Table of Contents



SIGNATURES
  SUNTRON CORPORATIONDate:  March 30, 2007
    By:
    /s/ Hargopal SinghHargopal SinghPresident and Chief Executive Officer  Name
    
    
    
    Title
    
    Date/s/Hargopal Singh

    Hargopal Singh
    
    
    
    President, Chief Executive Officer
(Principal Executive Officer), and
Director
    
    March 30, 2007/s/Thomas B. Sabol

    Thomas B. Sabol
    
    
    
    Chief Financial Officer and Director
(Principal Financial Officer)
    
    March 30, 2007/s/James A. Doran

    James A. Doran
    
    
    
    Chief Accounting Officer and Secretary
(Principal Accounting Officer)
    
    March 30, 2007/s/Allen S. Braswell, Jr.

    Allen S. Braswell, Jr.
    
    
    
    Director
    
    March 30, 2007/s/Ivor J. Evans

    Ivor J. Evans
    
    
    
    Director and Chairman of the Board
    
    March 30, 2007/s/James J. Forese

    James J. Forese
    
    
    
    Director
    
    March 30, 2007/s/Kurt D. Grindstaff

    Kurt D. Grindstaff
    
    
    
    Director
    
    March 30, 2007/s/Douglas P. McCormick

    Douglas P. McCormick
    
    
    
    Director
    
    March 30, 2007/s/Scott D. Rued

    Scott D. Rued
    
    
    
    Director
    
    March 30, 2007/s/Marc T. Schölvinck

    Marc T. Schölvinck
    
    
    
    Director
    
    March 30, 2007/s/William S. Urkiel

    William S. Urkiel
    
    
    
    Director
    
    March 30, 2007
 36




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##### Table of Contents



SUNTRON CORPORATION
 
 Index to Consolidated Financial Statements and Schedule
 Page(s)Consolidated Financial Statements:Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2005 and 2006
    
    F-3 to F-4Consolidated Statements of Operations for the years ended
December 31, 2004, 2005 and 2006
    
    F-5Consolidated Statements of Stockholders Equity for the
years ended December 31, 2004, 2005 and 2006
    
    F-6Consolidated Statements of Cash Flows for the years ended
December 31, 2004, 2005 and 2006
    
    F-7 to F-8Notes to Consolidated Financial Statements
    
    F-9 to F-26Supplementary Schedule:Schedule II- Valuation and Qualifying Accounts
    
    F-27
 F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Share-Based Payment
  
 F-2




---



##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 As of December 31, 2005 and 2006
 (In Thousands, Except Per Share Amounts)
 2005
    
    
    2006ASSETSCurrent Assets:Cash and equivalents
    
    $
    59
    
    
    $
    46Trade receivables, net of allowance for doubtful
accounts of $1,678 and $1,647, respectively
    
    
    51,377
    
    
    
    40,756Inventories
    
    
    61,985
    
    
    
    56,038Land, building and improvements held for sale, net
    
    
    18,772
    
    
    
    Prepaid expenses and other
    
    
    1,430
    
    
    
    1,186Total Current Assets
    
    
    133,623
    
    
    
    98,026Property and Equipment,at cost:Leasehold improvements
    
    
    7,338
    
    
    
    6,693Manufacturing machinery and equipment
    
    
    48,050
    
    
    
    44,972Furniture, computer equipment and software
    
    
    34,327
    
    
    
    32,033Total
    
    
    89,715
    
    
    
    83,698Less accumulated depreciation and amortization
    
    
    (81,348
    )
    
    
    (78,514
    )Net Property and Equipment
    
    
    8,367
    
    
    
    5,184Intangible and Other Assets:Goodwill
    
    
    10,918
    
    
    
    10,918Deposits and other
    
    
    180
    
    
    
    1,690Debt issuance costs, net
    
    
    1,586
    
    
    
    620Identifiable intangible assets, net of accumulated
amortization of $1,325 and $1,525, respectively
    
    
    675
    
    
    
    475Total Intangible and Other Assets
    
    
    13,359
    
    
    
    13,703Total Assets
    
    $
    155,349
    
    
    $
    116,913
  F-3




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, Continued
As of December 31, 2005 and 2006
(In Thousands, Except Per Share Amounts)
 2005
    
    
    2006LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    38,605
    
    
    $
    30,285Outstanding checks in excess of cash balances
    
    
    1,039
    
    
    
    804Borrowings under revolving credit agreement
    
    
    47,000
    
    
    
    19,759Accrued compensation and benefits
    
    
    6,181
    
    
    
    4,721Current portion of accrued exit costs related to facility closures
    
    
    494
    
    
    
    469Payable to affiliates
    
    
    501
    
    
    
    432Other accrued liabilities
    
    
    5,934
    
    
    
    3,783Total Current Liabilities
    
    
    99,754
    
    
    
    60,253Long-term Liabilities:Subordinated debt payable to affiliate
    
    
    
    
    
    
    11,353Accrued exit costs related to facility closures
    
    
    122
    
    
    
    Other
    
    
    905
    
    
    
    1,755Total Liabilities
    
    
    100,781
    
    
    
    73,361Commitments and Contingencies (Notes 5, 11, 12 and 13)Stockholders Equity:Preferred stock, $.01 par value. Authorized 10,000 shares, none issued
    
    
    
    
    
    
    Common stock, $.01 par value. Authorized 50,000 shares; issued
and outstanding 27,415 shares and 27,577 shares, respectively
    
    
    274
    
    
    
    276Additional paid-in capital
    
    
    380,744
    
    
    
    381,329Deferred stock compensation
    
    
    (276
    )
    
    
    Accumulated deficit
    
    
    (326,174
    )
    
    
    (338,053
    )Total Stockholders Equity
    
    
    54,568
    
    
    
    43,552Total Liabilities and Stockholders Equity
    
    $
    155,349
    
    
    $
    116,913
  F-4




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Years Ended December 31, 2004, 2005 and 2006
 (In Thousands, Except Per Share Amounts)
 2004
    
    
    2005
    
    
    2006Net Sales
    
    $
    475,388
    
    
    $
    328,730
    
    
    $
    320,786Cost of Goods Sold
    
    
    449,516
    
    
    
    311,894
    
    
    
    302,673Gross profit
    
    
    25,872
    
    
    
    16,836
    
    
    
    18,113Operating Expenses:Selling, general and administrative expenses
    
    
    24,361
    
    
    
    22,758
    
    
    
    22,815Severance, retention, and lease exit costs
    
    
    1,085
    
    
    
    869
    
    
    
    619Related party management and consulting fees
    
    
    750
    
    
    
    750
    
    
    
    750Total operating expenses
    
    
    26,196
    
    
    
    24,377
    
    
    
    24,184Operating loss
    
    
    (324
    )
    
    
    (7,541
    )
    
    
    (6,071
    )Other Income (Expense):Interest expense
    
    
    (3,982
    )
    
    
    (4,703
    )
    
    
    (5,936
    )Gain (loss) on sale of assets
    
    
    (11
    )
    
    
    695
    
    
    
    25Unrealized loss on marketable equity securities
    
    
    (385
    )
    
    
    (144
    )
    
    
    Interest and other income
    
    
    245
    
    
    
    351
    
    
    
    103Total other income (expense)
    
    
    (4,133
    )
    
    
    (3,801
    )
    
    
    (5,808
    )Net loss
    
    $
    (4,457
    )
    
    $
    (11,342
    )
    
    $
    (11,879
    )Loss Per Share (Basic and Diluted)
    
    $
    (0.16
    )
    
    $
    (0.41
    )
    
    $
    (0.43
    )Weighted Average Shares Outstanding (Basic and
Diluted)
    
    
    27,413
    
    
    
    27,415
    
    
    
    27,525
  F-5




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 For the Years Ended December 31, 2004, 2005 and 2006
 (In Thousands)
 AdditionalCommon Stock
    
    
    Paid-in
    
    
    Deferred Stock
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Deficit
    
    
    TotalBalances, December 31, 2003
    
    
    27,409
    
    
    $
    274
    
    
    $
    380,804
    
    
    $
    (754
    )
    
    $
    (310,375
    )
    
    $
    69,949Amortization of
deferred stock
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    
    
    
    
    300Write-off of unvested
deferred stock
compensation related to
cancelled options
    
    
    
    
    
    
    
    
    
    
    (189
    )
    
    
    189
    
    
    
    
    
    
    
    Stock options exercised
    
    
    6
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,457
    )
    
    
    (4,457
    )Balances, December 31, 2004
    
    
    27,415
    
    
    
    274
    
    
    
    380,637
    
    
    
    (265
    )
    
    
    (314,832
    )
    
    
    65,814Compensation cost
related to stock
options granted to
employees
    
    
    
    
    
    
    
    
    
    
    414
    
    
    
    (414
    )
    
    
    
    
    
    
    Amortization of
deferred stock
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    96Write-off of unvested
deferred stock
compensation related to
cancelled options
    
    
    
    
    
    
    
    
    
    
    (307
    )
    
    
    307
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,342
    )
    
    
    (11,342
    )Balances, December 31, 2005
    
    
    27,415
    
    
    
    274
    
    
    
    380,744
    
    
    
    (276
    )
    
    
    (326,174
    )
    
    
    54,568Stock options exercised
    
    
    162
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Attribution of
share-based
compensation cost
    
    
    
    
    
    
    
    
    
    
    861
    
    
    
    
    
    
    
    
    
    
    
    861Elimination of
deferred stock
compensation in
connection with
adoption of FAS123R
    
    
    
    
    
    
    
    
    
    
    (276
    )
    
    
    276
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,879
    )
    
    
    (11,879
    )Balances, December 31, 2006
    
    
    27,577
    
    
    $
    276
    
    
    $
    381,329
    
    
    $
    
    
    
    $
    (338,053
    )
    
    $
    43,552
  F-6




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31, 2004, 2005 and 2006
 (In Thousands)
 2004
    
    
    2005
    
    
    2006Cash Flows from Operating Activities:Net loss
    
    $
    (4,457
    )
    
    $
    (11,342
    )
    
    $
    (11,879
    )Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    11,199
    
    
    
    7,809
    
    
    
    4,597Amortization of debt issuance costs
    
    
    962
    
    
    
    843
    
    
    
    2,077Impairment of property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    734Loss (gain) on sale of assets
    
    
    11
    
    
    
    (695
    )
    
    
    (25
    )Stock-based compensation expense
    
    
    300
    
    
    
    96
    
    
    
    861Interest on subordinated debt to affiliates
    
    
    
    
    
    
    
    
    
    
    1,353Marketable equity securities received for recovery of bad debt
    
    
    (777
    )
    
    
    
    
    
    
    Unrealized loss on marketable equity securities
    
    
    385
    
    
    
    144
    
    
    
    Changes in operating assets and liabilities, net of effects of
purchase of businesses:Decrease (increase) in:Trade receivables, net
    
    
    (15,940
    )
    
    
    (942
    )
    
    
    10,621Inventories
    
    
    (17,562
    )
    
    
    17,217
    
    
    
    5,947Prepaid expenses and other
    
    
    2,697
    
    
    
    (406
    )
    
    
    234Increase (decrease) in:Accounts payable
    
    
    2,530
    
    
    
    2,826
    
    
    
    (8,795
    )Accrued compensation and benefits
    
    
    (408
    )
    
    
    (486
    )
    
    
    (1,460
    )Other accrued liabilities
    
    
    (1,714
    )
    
    
    1,436
    
    
    
    (3,176
    )Net cash provided by (used in) operating activities
    
    
    (22,774
    )
    
    
    16,500
    
    
    
    1,089Cash Flows from Investing Activities:Proceeds from sale of property, plant and equipment
    
    
    642
    
    
    
    3,371
    
    
    
    18,785Professional fees associated with sale of property
    
    
    
    
    
    
    
    
    
    
    (105
    )Payments for acquisition of businesses
    
    
    (2,466
    )
    
    
    (1,383
    )
    
    
    Payments for property, plant and equipment
    
    
    (2,697
    )
    
    
    (2,047
    )
    
    
    (2,338
    )Net cash provided by (used in) investing activities
    
    
    (4,521
    )
    
    
    (59
    )
    
    
    16,342Cash Flows from Financing Activities:Proceeds from borrowings under debt agreements
    
    
    505,224
    
    
    
    323,951
    
    
    
    364,360Principal payments under debt agreements
    
    
    (480,218
    )
    
    
    (336,529
    )
    
    
    (380,532
    )Payments for debt issuance costs
    
    
    (1,998
    )
    
    
    (563
    )
    
    
    (1,039
    )Increase (decrease) in outstanding checks in excess of cash balances
    
    
    4,253
    
    
    
    (3,255
    )
    
    
    (235
    )Proceeds from exercise of stock options
    
    
    22
    
    
    
    
    
    
    
    2Net cash provided by (used in) financing activities
    
    
    27,283
    
    
    
    (16,396
    )
    
    
    (17,444
    )Net increase (decrease) in cash and equivalents
    
    
    (12
    )
    
    
    45
    
    
    
    (13
    )Cash and Equivalents:Beginning of year
    
    
    26
    
    
    
    14
    
    
    
    59End of year
    
    $
    14
    
    
    $
    59
    
    
    $
    46
  F-7




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
For the Years Ended December 31, 2004, 2005 and 2006
(In Thousands)
 2004
    
    
    2005
    
    
    2006Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    2,496
    
    
    $
    3,415
    
    
    $
    3,611Cash paid for income taxes
    
    $
    
    
    
    $
    
    
    
    $
    Supplemental Schedule of Non-cash Investing and
Financing Activities:Deposit retained by purchaser of real estate
to secure obligations related to partial
leaseback of building
    
    $
    
    
    
    $
    
    
    
    $
    1,500Payable for acquisition of business
    
    $
    1,408
    
    
    $
    
    
    
    $
    Contract payable for acquisition of equipment
    
    $
    793
    
    
    $
    157
    
    
    $
    
  F-8




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1. Basis of Presentation, Nature of Business and Significant Accounting Policies
 Basis of Presentation.
  Fiscal Year. st st
 Nature of Business.
 Cash and Equivalents
 F-9




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Trade Receivables.
 Inventories
 Property, Plant and Equipment
 YearsBuildings and improvements
    
    30 to 40Manufacturing machinery and equipment
    
    5 to 10Furniture, computer equipment and software
    
    3 to 7
  F-10




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Identifiable Intangible Assets.
  Debt Issuance Costs.
 Goodwill
 Revenue Recognition
  Revenue Arrangements with Multiple Deliverables,
 Shipping and Handling Fees.
 Stock-based Compensation Share-Based Payment
 F-11




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees.
   2004
    
    
    2005Net Loss
    
    
    EPS
    
    
    Net Loss
    
    
    EPSAmounts reported
    
    $
    (4,457
    )
    
    $
    (0.16
    )
    
    $
    (11,342
    )
    
    $
    (0.41
    )Add stock-based employee compensation
recorded under the intrinsic value
method
    
    
    300
    
    
    
    
    
    
    
    96Less stock-based employee compensation
under the fair value method
    
    
    (995
    )
    
    
    
    
    
    
    (358
    )Pro forma under fair value method
    
    $
    (5,152
    )
    
    $
    (0.19
    )
    
    $
    (11,604
    )
    
    $
    (0.42
    )
 Income Taxes
 F-12




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Financial Instruments
 Earnings Per Share
 New Accounting Standards. Accounting for Uncertainty in Income Taxes
 Fair Value Measurements.
 The Fair Value Option for Financial Assets
and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115
 F-13




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements.
 2. Liquidity
   
    
    On March 30, 2006, a building and land in Sugar Land, Texas was sold, resulting in net
proceeds of approximately $16,700 that was used to repay outstanding debt. On April 11,
2006, the sale of an adjacent land parcel was completed, which generated additional net
proceeds of approximately $1,400. The Company leased back approximately 50% of the
building under a seven-year lease to continue its manufacturing operations at that
location. In addition to the benefit from eliminating future interest cost due to the
repayment of debt, the Company eliminated fixed overhead costs for real estate taxes,
insurance and utilities related to the portion of the building that was not leased back.
    
    On March 30, 2006, the Company entered into a new three-year credit facility with US
Bank that permits borrowings up to $50,000 and matures in March 2009. As of December 31,
2006, the principal balance under the US Bank credit agreement was approximately $19,759
and the Company had unused borrowing availability of approximately $18,413.
    
    On March 30, 2006, the Company entered into a $10,000 subordinated Note Purchase
Agreement with an affiliate of its majority stockholder. In addition, the affiliate agreed
to make additional subordinated loans up to $5,000 if the Company fails to comply with the
financial covenants in its new credit facility. The outstanding principal balance plus all
accrued interest is due in May 2009.
    
    During 2006, the Company further improved plant capacity utilization and the elimination
of fixed overhead costs through the closure of business units in Lawrence, Massachusetts
and Olathe, Kansas. In March 2007, the Company amended its lease in Lawrence, Massachusetts
whereby future operating lease payments of approximately $2,150 were eliminated in exchange
for a cash payment of approximately $1,080.
    
    In November 2006, the Company executed an agreement with Applied Materials (Applied
Materials) that resulted in the termination of litigation that was initiated in 2004. In
2005 and 2006, the Company incurred substantial costs related to this litigation and the
settlement resulted in the elimination of these costs beginning in December 2006.
    
    In February 2007, the Company sold its business unit located in Garner, Iowa for a
selling price of
approximately $4,800, resulting in a gain on sale of approximately $500.
 F-14




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
  3. Intangible Assets
 Goodwill.
 Northwest
    
    $
    6,729Trilogic
    
    
    3,931Other
    
    
    258Total
    
    $
    10,918
 Identifiable Intangible Assets.
 2005
    
    
    2006Cost
    
    $
    2,000
    
    
    $
    2,000Accumulated amortization
    
    
    (1,325
    )
    
    
    (1,525
    )Net
    
    $
    675
    
    
    $
    475
  4. Inventories
  December 31,2005
    
    
    2006Purchased parts and completed sub-assemblies
    
    $
    41,798
    
    
    $
    40,182Work-in-process
    
    
    10,622
    
    
    
    11,699Finished goods
    
    
    9,565
    
    
    
    4,157Total
    
    $
    61,985
    
    
    $
    56,038
  F-15




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5. Debt
       F-16




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    6 . Income Taxes
   2004
    
    
    2005
    
    
    2006Income tax benefit at the statutory rate
    
    $
    1,515
    
    
    $
    3,856
    
    
    $
    4,039Benefit (expense) resulting from:Increase in Federal valuation allowance
    
    
    (1,786
    )
    
    
    (4,262
    )
    
    
    (4,710
    )Other, net
    
    
    271
    
    
    
    406
    
    
    
    671Income tax benefit
    
    $
    
    
    
    $
    
    
    
    $
    
 F-17




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2005
    
    
    2006Federal net operating loss carryforwards
    
    $
    80,598
    
    
    $
    89,454State net operating loss carryforwards
    
    
    6,343
    
    
    
    7,448Intangible assets
    
    
    20,760
    
    
    
    18,491Inventories
    
    
    5,636
    
    
    
    2,854Accrued compensation, benefits, severance and
lease exit costs
    
    
    1,837
    
    
    
    1,962Property, plant and equipment
    
    
    1,020
    
    
    
    840Allowance for doubtful accounts receivable
    
    
    713
    
    
    
    680Other
    
    
    159
    
    
    
    49Total deferred tax assets
    
    
    117,066
    
    
    
    121,778Less valuation allowance
    
    
    (117,066
    )
    
    
    (121,778
    )Net deferred tax assets
    
    $
    
    
    
    $
    
  7. Stock-based Compensation
 Stock Options.
 2004
    
    
    2005
    
    
    2006Shares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding, beginning of year
    
    
    2,361
    
    
    $
    10.28
    
    
    
    2,081
    
    
    $
    9.81
    
    
    
    2,264
    
    
    $
    5.94Granted
    
    
    195
    
    
    
    8.31
    
    
    
    1,064
    
    
    
    1.36
    
    
    
    1,110
    
    
    
    2.40Canceled
    
    
    (469
    )
    
    
    11.66
    
    
    
    (881
    )
    
    
    9.54
    
    
    
    (800
    )
    
    
    7.08Exercised
    
    
    (6
    )
    
    
    3.81
    
    
    
    
    
    
    
    
    
    
    
    (162
    )
    
    
    .01Outstanding, end of year
    
    
    2,081
    
    
    $
    9.81
    
    
    
    2,264
    
    
    $
    5.94
    
    
    
    2,412
    
    
    $
    4.34
  F-18




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Stock Options Outstanding
    
    
    Stock Options ExercisableExercise Prices
    
    
    Remaining
    
    
    Number
    
    
    Weighted
    
    
    NumberRange
    
    
    Weighted
    
    
    Contractual
    
    
    of
    
    
    Average
    
    
    ofLow
    
    
    High
    
    
    Average
    
    
    Term (Years)
    
    
    Shares
    
    
    Exercise Price
    
    
    Shares$
    0.01
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    
    1.2
    
    
    
    75
    
    
    $
    0.01
    
    
    
    1.04
    
    
    
    2.25
    
    
    
    1.70
    
    
    
    8.5
    
    
    
    999
    
    
    
    1.68
    
    
    
    2122.50
    
    
    
    3.74
    
    
    
    2.59
    
    
    
    8.9
    
    
    
    765
    
    
    
    3.62
    
    
    
    514.16
    
    
    
    5.77
    
    
    
    4.39
    
    
    
    6.9
    
    
    
    117
    
    
    
    4.39
    
    
    
    1177.36
    
    
    
    11.00
    
    
    
    10.42
    
    
    
    5.3
    
    
    
    244
    
    
    
    10.42
    
    
    
    24411.64
    
    
    
    15.20
    
    
    
    14.65
    
    
    
    3.8
    
    
    
    159
    
    
    
    14.65
    
    
    
    15915.88
    
    
    
    57.24
    
    
    
    26.27
    
    
    
    1.8
    
    
    
    53
    
    
    
    26.27
    
    
    
    53$
    0.01
    
    
    $
    57.24
    
    
    $
    4.34
    
    
    
    7.6
    
    
    
    2,412
    
    
    $
    8.75
    
    
    
    836
     F-19




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Fair Value Method.
 Year ended December 31,2004
    
    2005
    
    2006Dividend yield
    
    
    
    
    
    
    
    
    
    
    Expected volatility
    
    
    110.1
    %
    
    
    107.5
    %
    
    
    93.4
    %Risk-free interest rate
    
    
    3.6
    %
    
    
    3.8
    %
    
    
    4.8
    %Expected term (years)
    
    
    5.5
    
    
    
    3.6
    
    
    
    3.9
  8. Related Party Transactions
 Purchases and Net Sales.
 Management and Consulting Fees.
 Subordinated Note Purchase Agreement.
 F-20




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9. Restructuring Activities
  2004
    
    
    2005
    
    
    2006Amounts related to manufacturing activities and included in cost
of goods sold:Severance and retention costs
    
    $
    232
    
    
    $
    1,020
    
    
    $
    1,119Lease exit costs
    
    
    16
    
    
    
    225
    
    
    
    218Moving and relocation costs
    
    
    50
    
    
    
    
    
    
    
    847Impairment of manufacturing assets
    
    
    
    
    
    
    
    
    
    
    734Total included in cost of goods sold
    
    
    298
    
    
    
    1,245
    
    
    
    2,918Amounts unrelated to manufacturing activities and excluded from
cost of goods sold:Severance and retention costs
    
    
    393
    
    
    
    510
    
    
    
    247Lease exit costs
    
    
    650
    
    
    
    321
    
    
    
    212Moving, relocation and other costs
    
    
    42
    
    
    
    38
    
    
    
    160Total severance, retention and
lease exit costs
    
    
    1,085
    
    
    
    869
    
    
    
    619Total restructuring expense
    
    $
    1,383
    
    
    $
    2,114
    
    
    $
    3,537
  Plant Consolidations
    F-21




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Summary of Restructuring Liabilities.
 Accrued
    
    
    AccruedLease Exit
    
    
    Severance &Costs
    
    
    RetentionBalance, December 31, 2004
    
    $
    667
    
    
    $
    127Accrued expense for restructuring activities
    
    
    156
    
    
    
    1,530Cash receipts under subleases
    
    
    234
    
    
    
    Cash payments
    
    
    (835
    )
    
    
    (1,341
    )Accretion of interest
    
    
    14
    
    
    
    Reclassification of non-level rent liability
    
    
    4
    
    
    
    Expense due to change in previous estimates
    
    
    376
    
    
    
    Balance, December 31, 2005
    
    
    616
    
    
    
    316Accrued expense for restructuring activities
    
    
    190
    
    
    
    1,366Cash receipts under subleases
    
    
    144
    
    
    
    Cash payments
    
    
    (721
    )
    
    
    (1,566
    )Accretion of interest
    
    
    63
    
    
    
    Expense due to change in previous estimates
    
    
    177
    
    
    
    Balance, December 31, 2006
    
    $
    469
    
    
    $
    116
  F-22




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10. Business and Credit Concentrations
  Semiconductor
    
    Aerospace
    
    Networking andYear
    
    Industrial
    
    Capital Equipment
    
    and Defense
    
    Telecommunications
    
    Medical2004
    
    
    25
    %
    
    
    39
    %
    
    
    24
    %
    
    
    9
    %
    
    
    3
    %2005
    
    
    29
    %
    
    
    22
    %
    
    
    30
    %
    
    
    15
    %
    
    
    4
    %2006
    
    
    40
    %
    
    
    31
    %
    
    
    20
    %
    
    
    5
    %
    
    
    4
    %
     F-23




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11. Commitments and Contingencies
 Operating Leases.
  Year Ending December 31:2007
    
    $
    5,1222008
    
    
    3,7512009
    
    
    3,2922010
    
    
    2,8732011
    
    
    2,285After 2011
    
    
    2,397$
    19,720
  Employment Agreements.
 Employee Benefit Plan.
 Legal Proceedings.
 F-24




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   12. Assets Held for Sale
  Vacant land held for sale
    
    $
    1,798Building and improvements
    
    
    18,477Land associated with building
    
    
    2,350Total
    
    
    22,625Accumulated depreciation
    
    
    (3,853
    )Net Carrying Value
    
    $
    18,772
  F-25




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 13. Subsequent Events
   14. Quarterly Financial Information (Unaudited)
  Year Ended December 31, 2005
    
    
    Year Ended December 31, 2006Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4Net sales
    
    $
    82,736
    
    
    $
    81,758
    
    
    $
    80,383
    
    
    $
    83,853
    
    
    $
    95,795
    
    
    $
    85,101
    
    
    $
    70,604
    
    
    $
    69,286Cost of goods sold
    
    
    82,264
    
    
    
    77,884
    
    
    
    74,868
    
    
    
    76,878
    
    
    
    87,781
    
    
    
    78,895
    
    
    
    66,577
    
    
    
    69,420Gross profit (loss)
    
    
    472
    
    
    
    3,874
    
    
    
    5,515
    
    
    
    6,975
    
    
    
    8,014
    
    
    
    6,206
    
    
    
    4,027
    
    
    
    (134
    )Selling, general &
administrative
    
    
    (5,618
    )
    
    
    (6,136
    )
    
    
    (5,652
    )
    
    
    (5,352
    )
    
    
    (6,051
    )
    
    
    (6,198
    )
    
    
    (6,363
    )
    
    
    (4,203
    )Severance, retention and lease
exit costs
    
    
    (26
    )
    
    
    (611
    )
    
    
    (44
    )
    
    
    (188
    )
    
    
    (122
    )
    
    
    (222
    )
    
    
    (123
    )
    
    
    (152
    )Related party management and
consulting fees
    
    
    (188
    )
    
    
    (187
    )
    
    
    (188
    )
    
    
    (187
    )
    
    
    (188
    )
    
    
    (187
    )
    
    
    (188
    )
    
    
    (187
    )Operating income (loss)
    
    
    (5,360
    )
    
    
    (3,060
    )
    
    
    (369
    )
    
    
    1,248
    
    
    
    1,653
    
    
    
    (401
    )
    
    
    (2,647
    )
    
    
    (4,676
    )Interest expense
    
    
    (1,090
    )
    
    
    (1,187
    )
    
    
    (1,199
    )
    
    
    (1,227
    )
    
    
    (2,825
    )
    
    
    (938
    )
    
    
    (1,075
    )
    
    
    (1,098
    )Gain (loss) on sale of assets
    
    
    241
    
    
    
    397
    
    
    
    17
    
    
    
    40
    
    
    
    20
    
    
    
    26
    
    
    
    (6
    )
    
    
    (15
    )Unrealized loss on
marketable equity securities
    
    
    (144
    )
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4
    
    
    
    3⁄4Other, net
    
    
    164
    
    
    
    105
    
    
    
    17
    
    
    
    65
    
    
    
    15
    
    
    
    (3
    )
    
    
    25
    
    
    
    66Net income (loss)
    
    $
    (6,189
    )
    
    $
    (3,745
    )
    
    $
    (1,534
    )
    
    $
    126
    
    
    $
    (1,137
    )
    
    $
    (1,316
    )
    
    $
    (3,703
    )
    
    $
    (5,723
    )Basic and diluted earnings
(loss) per share
    
    $
    (0.23
    )
    
    $
    (0.14
    )
    
    $
    (0.06
    )
    
    $
    0.00
    
    
    $
    (0.04
    )
    
    $
    (0.05
    )
    
    $
    (0.13
    )
    
    $
    (0.21
    )
  F-26




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##### Table of Contents



SUNTRON CORPORATION AND SUBSIDARIES
 
 SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS
 Accounts ReceivableAllowance for Doubtful Accounts
 (Dollars in Thousands)
 Balance at
    
    
    
    
    
    
    
    
    
    Balance atBeginning
    
    Additions Charged
    
    
    
    
    
    End OfYear Ended December 31,
    
    Of Year
    
    To Earnings
    
    Deductions
    
    Year2004
    
    $
    2,898
    
    
    $
    1,791
    
    
    $
    3,278
    (1)
    
    $
    1,4112005
    
    
    1,411
    
    
    
    1,465
    
    
    
    1,198
    (2)
    
    
    1,6782006
    
    
    1,678
    
    
    
    1,129
    
    
    
    1,160
    (3)
    
    
    1,647
 
 (1)
    
    Deductions consist of write-offs of $2,350 and recoveries of $928.(2)
    
    Deductions consist of write-offs of $637 and recoveries of $561.(3)
    
    Deductions consist of write-offs of $784 and recoveries of $376. F-27




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##### Table of Contents



Index to Exhibits
 ExhibitNumber
    
    Description2.1
    
    Amended and Restated Agreement and Plan of Merger, dated as of May 3, 2001, by and among EFTC
Corporation, K*TEC Electronics Holding Corporation, Thayer-Blum Funding II, L.L.C. and the
registrant. (1)3.1
    
    Certificate of Incorporation of the registrant. (1)3.2
    
    Bylaws of the registrant. (1)4.1
    
    Specimen Stock Certificate. (1)10.1
    
    Suntron Corporation Amended and Restated 2002 Stock Option Plan. (3)10.2
    
    Registration Rights Agreement between the registrant and Thayer-Blum. (1)10.3
    
    Lease Agreement dated as of May 10, 1999 by and between Orsett/I-17 L.L.C. and EFTC
Corporation. (1)10.4
    
    Industrial Lease dated December 18, 1998 by and between Buckhorn Trading Co., LLC and EFTC
Corporation. (1)10.5
    
    Commercial/Industrial Lease dated as of April 1, 2001 by and between EFTC Corporation and H.
J. Brooks, LLC. (1)10.6
    
    Management and Consulting Agreement by and between Suntron Corporation and Thayer-Blum
Funding III, L.L.C. (2)10.7
    
    Amended and Restated Employment agreement between Suntron and Hargopal (Paul) Singh (5)10.8
    
    Form of Change of Control Severance Agreement between Suntron Corporation and certain
executives (4)10.9
    
    Earnest Money Contract dated effective as of December 27, 2005 by and between Suntron GCO, LP
and GSL Industrial Partners, L.P. (4)10.10
    
    First Letter Agreement to Earnest Money Contract dated as February 2, 2006 (4)10.11
    
    Second Letter Agreement to Earnest Money Contract dated as of March 8, 2006 (4)10.12
    
    Third Letter Agreement to Earnest Money Contract dated as of March 17, 2006 (4)10.13
    
    Fourth Letter Agreement to Earnest Money Contract dated as of March 22, 2006 (4)10.14
    
    Assignment of Earnest Money Contract dated as of March 21, 2006 between Suntron GCO, LP and
GSL Industrial Partners, L.P. (4)10.15
    
    Triple Net Industrial Lease dated effective as of March 30, 2006 by and between Suntron GCO,
LP and GSL 16/VIF Gillingham, L.P. (4)10.16
    
    Financing Agreement dated as of March 28, 2006 by and between Suntron Corporation and U.S.
Bank National Association (4)




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##### Table of Contents



ExhibitNumber
    
    Description10.17
    
    Note Purchase Agreement dated as of March 28, 2006 by and between Suntron Corporation and
Thayer Equity Investors IV, L.P. (4)10.18
    
    Maintenance Agreement dated as of March 28, 2006 by and between Suntron Corporation and
Thayer Equity Investors IV, L.P. (4)21
    
    List of Subsidiaries of the registrant. (6)23.1
    
    Consent of KPMG LLP (7)31.1
    
    Certification of Chief Executive
Officer pursuant to Section 302 of the Sarbanes- Oxley Act of
2002. (7)31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (7)32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 (7)32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (7)
 
 (1)
    
    Incorporated by reference to the Registration Statement on Form S-4 (Registration No.
333-72992) declared effective February 8, 2002.(2)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed on August 14, 2002.(3)
    
    Incorporated by reference to our 2002 Annual Report on Form 10-K filed on April 15, 2003.(4)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed on May 17, 2006.(5)
    
    Incorporated by reference to our Quarterly Report on Form 10-Q filed on August 14, 2006.(6)
    
    Incorporated by reference to our 2005 Annual Report on Form 10-K filed on March 31, 2006.(7)
    
    Filed herewith.