Cherokee International Reports Sales Growth for Fourth Quarter and Ful

    Business Editors/High-Tech Editors

    TUSTIN, Calif.--(BUSINESS WIRE)--March 2, 2005--Cherokee International Corp. (NASDAQ:CHRK), a leading provider of custom-designed power supplies, today announced financial results for its fourth quarter and year ended December 31, 2004.
    Net sales for the fourth quarter of 2004 increased 11% to $36.7 million, compared to $33.1 million for the same quarter in 2003. Net income for the fourth quarter of 2004 totaled $2.2 million, or $0.11 per diluted share, representing a $2.5 million improvement when compared to a net loss of $0.3 million, or $0.14 per diluted share, for the fourth quarter a year ago.
    Gross margin for the fourth quarter of 2004 was 27.7%, up slightly from the third quarter but down compared to 31.5% for the fourth quarter of last year. Operating income for the fourth quarter was $3.6 million, or 9.9% of net sales, compared to operating income of $3.7 million, or 11.3% of net sales, for the same period a year ago.
    The decrease in gross and operating margins resulted primarily from a different revenue mix during the fourth quarter of 2004 compared to the year-earlier period.
    For the year ended December 31, 2004, net sales increased 33% to $148.5 million, compared to $111.9 million for 2003. Net income for the year grew to $10.4 million, or $0.62 per diluted share, compared to a net loss of $12.4 million, or $5.83 per diluted share, for 2003. The net loss for 2003 included a special charge of $4.5 million for restructuring costs associated with the Company's operations in Europe.
    "We're pleased with our accomplishments this past year," commented Jeffrey M. Frank, Cherokee's chief executive officer. "New programs with new customers, along with increased account penetration with existing customers, continued to contribute to this year's solid sales growth. Further, the 140 new design wins we achieved this year should translate into meaningful revenue in the coming years."
    Looking ahead, the Company expects sales in the first quarter to be the lowest quarter in 2005, reflecting a combination of normal seasonal trends and the effect of transitioning certain programs to consignment hub arrangements.

    Conference Call Today

    The senior management of Cherokee will hold a conference call today at 5:00 p.m. EST (2:00 p.m. PST) to discuss the quarter in more detail. This conference call will be webcast live and can be accessed from the investor relations section on Cherokee's website at www.cherokeepwr.com. A replay of the webcast will be available on Cherokee's website immediately following the call.
    Investors who prefer to dial into the conference may call 800-291-9234 or 617-614-3923 for International callers. The passcode for both is 70991919. Please call in 10 minutes before the start of the call.
    A telephone replay will be available shortly after the live call. The replay number in the U.S. is 888-286-8010, and 617-801-6888 for International callers. Passcode for the telephone replay is 16397818. The telephone replay will be available through March 9, 2005.

    About Cherokee International

    Cherokee International Corporation designs and manufactures high reliability custom and standard power supplies for original equipment manufacturers. Our advanced power supply products are typically custom designed into higher-end applications in the computing and storage, wireless infrastructure, enterprise networking, medical and industrial markets.

    Safe Harbor Statement

    Certain statements contained in this press release are forward-looking statements. These forward-looking statements are based upon our current expectations about future events. When used in this press release, the words "believe," "anticipate," "intend," "estimate," "expect" and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. These forward-looking statements generally relate to our plans, objectives and expectations for future operations. However, these statements are subject to a number of risks and uncertainties affecting our business. You should read this press release completely and with the understanding that actual future results may be materially different from what we expect as a result of these risks and uncertainties and other factors, which include, but are not limited to: (1) changes in general economic and business conditions, domestically and internationally, (2) reductions in sales to, or the loss of, any of the Company's significant customers or in customer capacity generally, (3) changes in the Company's sales mix to lower margin products, (4) increased competition in the Company's industry, (5) disruptions of the Company's established supply channels, (6) the Company's level of debt and restrictions imposed by its debt agreements, and (7) the additional risk factors identified in the Company's filings with the Securities and Exchange Commission, including its Registration Statement on Form S-1 (File No. 333-110723). Except as required by law, the Company undertakes no obligation to update any forward-looking statements, even though the Company's situation may change in the future.

CHEROKEE INTERNATIONAL CORPORATION Condensed Consolidated Statements of Operations (In Thousands, Except Per Share Amounts) (Unaudited)

Three Months Ended Year Ended December 31, December 31, December 31, December 31, 2004 2003 2004 2003

Net sales $36,682 $33,123 $148,511 $111,943 Cost of sales 26,527 22,677 104,140 79,397 Gross profit 10,155 10,446 44,371 32,546 Operating Expenses: Engineering and development 1,954 2,495 9,082 8,905 Selling and marketing 2,121 1,764 7,896 6,253 General and administrative 2,445 2,290 8,726 7,364 Stock compensation expense 16 167 243 990 Restructuring costs --- --- --- 4,474 Total operating expenses 6,536 6,716 25,947 27,986 Operating income 3,619 3,730 18,424 4,560

Interest expense (725) (4,341) (5,234) (17,028) Other income, net 7 338 47 1,187 Income (loss) before income taxes 2,901 (273) 13,237 (11,281) Provision for income taxes 678 28 2,796 1,151 Net income (loss) $2,223 $(301) $10,441 $(12,432)

Income (loss) per share: Basic $0.12 $(0.14) $0.62 $(5.83) Diluted $0.11 $(0.14) $0.62 $(5.83)

Weighted average shares outstanding: Basic 19,196 2,214 16,761 2,132 Diluted 19,384 2,214 18,639 2,132

CHEROKEE INTERNATIONAL CORPORATION Condensed Consolidated Balance Sheets (In Thousands) (Unaudited)

December 31, December 31, 2004 2003 ASSETS

Current Assets: Cash and short-term investments $18,763 $4,978 Accounts receivable, net 27,929 25,579 Inventories 28,278 24,932 Prepaid expenses and other current assets 2,056 1,842 Total current assets 77,026 57,331 Property and equipment, net 15,028 12,781 Goodwill and other assets, net 7,758 7,103 $99,812 $77,215

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities: Accounts payable and accrued liabilities $26,782 $29,163 Revolving lines of credit --- 6,132 Current portion of long-term debt --- 2,562 Current portion of capital lease obligations --- 848 Total current liabilities 26,782 38,705 Long-term debt, net of current portion 46,630 162,893 Other long-term obligations 4,266 5,585 Stockholders' equity (deficit) 22,134 (129,968) $99,812 $77,215

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CONTACT: Cherokee International Van Holland, 714-508-2043 van.holland@cherokeepwr.com or Investor Relations, 714-508-2088 info@cherokeepwr.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE TELECOMMUNICATIONS NETWORKING MANUFACTURING EARNINGS CONFERENCE CALLS SOURCE: Cherokee International

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