Merix Corporation (NASDAQ: MERX) today announced consolidated
financial results for the first quarter of fiscal 2010 ended August
29, 2009.
Highlights
-- Sequential quarterly revenue levels stabilized. We are experiencing
increased demand for the second quarter of fiscal 2010
-- We realized quarterly book to bills of 1.03 in North America and
1.16 in Asia
-- Continued growth in the Defense & Aerospace end market
-- Ended quarter with $21.4 million in cash and cash equivalents
-- Cash and unused borrowing availability total $63.5 million,
representing an $8.7 million increase compared to the previous
quarter
Financial Results
The Company reported a net loss of $8.2 million or $0.38 per
diluted share on revenue of $57.8 million for the first quarter of
fiscal 2010, which compares to a net loss of $2.1 million or $0.10
per diluted share on revenue of $90.6 million in the first quarter
of fiscal 2009.
Included in the fiscal 2010 first quarter loss was $1.6 million
of non-recurring expense items comprised of the following:
-- $0.6 million of non-cash impairment charges associated with the
retirement of certain manufacturing equipment in our Oregon facility;
-- $0.3 million of severance payments; and
-- $0.7 million of legal and professional costs primarily related to
our ongoing securities litigation efforts and the recently announced
merger with ViaSystems Group, Inc.
Commenting on the recent first quarter performance, Michael D.
Burger, President and Chief Executive Officer, said, "Our first
quarter revenue decreased 2% compared to the fourth quarter of
fiscal 2009, but does not reflect a significant improvement in
demand experienced during July and August that has continued into
the second fiscal quarter. Our book-to-bill ratio improved in the
current quarter, exceeding 1:1 in both North America and Asia for
the first time in over a year. Backlog increased by nearly $4
million which we anticipate will lead to second quarter revenue
growth."
Mr. Burger continued, "We are pleased to report a significant
increase in both our North America and Asia order activity. We
continue to target an optimized cost structure, while carefully
managing capacity to respond to the recent increases in demand.
Further, our factory metrics for quality, yields and on-time
delivery continue to show positive trends, which is a tribute to
the entire operating team in a tough environment."
Merix' overall gross margins averaged 6.1% of revenue for the
first quarter compared to 11.3% and 8.5% in the first quarter of
fiscal 2009 and fourth quarter of fiscal 2009, respectively. The
decrease in gross margin is primarily due to product mix, as the
initial demand increases experienced in the first half of the
quarter were primarily in lower priced, lower technology boards
sold in the current quarter. First quarter of fiscal 2010 shipments
to the automotive end market grew 27% compared to the fourth
quarter of fiscal 2009. During the latter half of the quarter, we
saw a broader-based market segment recovery in both North America
and Asia operating units, which should be reflected in second
quarter revenue and margin enhancements.
Operating expenses, exclusive of impairment and restructuring
charges and certain legal and professional expenses associated
primarily with our securities litigation process, totaled $8.0
million in the first quarter of fiscal 2010 compared to $10.8
million and $8.1 million in the first quarter of fiscal 2009 and
fourth quarter of fiscal 2009, respectively.
Liquidity
During the first quarter the Company continued to show good
progress in managing its working capital and the balance sheet.
Merix ended the first quarter of fiscal 2010 with $21.4 million in
cash and cash equivalents. Borrowings under the Company's credit
facilities increased by $5.0 million to $13.0 million at the end of
the quarter, with $42.2 million of remaining availability under the
credit facilities. At the end of the first quarter, total cash and
available borrowing capacity equals $63.5 million, representing an
$8.7 million increase from the amounts reported in our fiscal 2009
annual report, due to the new credit facility with the Industrial
and Commercial Bank of China, Ltd. as well as increases in the
borrowing base under our existing Bank of America, N.A. line of
credit.
Conference Call and Webcast Information
Merix will conduct a conference call and live webcast Wednesday,
October 7, 2009 at 5:30 a.m. PT. Management will discuss first
quarter fiscal 2010 financial results, provide a qualitative
discussion regarding our business outlook and comment further on
the strategic direction of the Company. To access the webcast, log
on to www.merix.com.
An online replay of the webcast will be available at 10:30 a.m.
PT on October 7, 2009 and a telephone replay will be available from
4:00 p.m. PT on October 7, 2009 until 11:59 pm PT on Wednesday,
October 14, 2009 by calling (320) 365-3844, access code 117807.
About Merix
Merix is a leading manufacturer of technologically advanced,
multilayer, rigid printed circuit boards for use in sophisticated
electronic equipment. Merix provides high-performance materials,
quick-turn prototype, pre-production and volume production services
to its customers. Principal markets served by Merix include
communications and networking, computing and peripherals, test,
industrial and medical, defense and aerospace, and automotive end
markets in the electronics industry. Additional corporate
information is available on the internet at www.merix.com.
Forward-Looking Statements
This release contains "forward-looking statements" within the
meaning of the Securities Litigation Reform Act of 1995 relating to
the Company's business operations and prospects, including
statements related to estimates of financial results for future
reporting periods that are made pursuant to the safe harbor
provisions of the federal securities laws. These forward-looking
statements, which may be identified by the inclusion of words such
as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," "goals" and other similar expressions, are
based on current expectations, estimates, assumptions and
projections that are subject to change. Actual results may differ
materially from the forward-looking statements. Many factors,
including the following, could cause actual results to differ
materially from the forward-looking statements: our ability to
control or pass through increases in the cost of raw materials and
supplies; anticipated changes in customer order levels, product mix
and inventory build-up; lower than expected or delayed sales;
continued availability of our line of credit facility or sources of
additional capital; the ability to successfully restructure Merix
Oregon; fluctuations in demand for products and services of the
Company, including quick-turn and premium services; foreign
currency risk; the introduction of new products or technologies by
competitors; the ability to avoid unanticipated costs, including
costs relating to product quality issues and customer warranty
claims; ability to hire, train and retain necessary labor to
produce our products; pricing and other competitive pressures in
the industry from domestic and global competitors; all other risks
inherent in foreign operations such as increased regulatory
complexity and compliance cost and greater political and economic
instability; our ability to fully utilize our assets and control
costs; our ability to retain or attract employees with sufficient
know-how to conduct our manufacturing processes and maintain or
increase our production output and quality; and other risks listed
from time to time in the Company's filings with the Securities and
Exchange Commission or otherwise disclosed by the Company,
including those set forth in the Company's Annual Report on Form
10-K for the year ended May 30, 2009. Merix Corporation does not
undertake to update any such factors or to publicly announce
developments or events relating to the matters described
herein.
MERIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share data)
(Unaudited)
Fiscal quarter ended
-------------------------------
Aug. 29, May 30, Aug. 30,
2009 2009 2008
--------- --------- ---------
Net sales:
North America $ 26,297 $ 27,274 $ 44,917
Asia 31,500 31,605 45,710
--------- --------- ---------
Total net sales 57,797 58,879 90,627
Cost of sales:
North America 27,068 26,797 39,753
Asia 27,215 27,081 40,600
--------- --------- ---------
Total cost of sales 54,283 53,878 80,353
--------- --------- ---------
Gross profit:
North America (771) 477 5,164
Asia 4,285 4,524 5,110
--------- --------- ---------
Total gross proft 3,514 5,001 10,274
--------- --------- ---------
Gross margin:
North America -2.9% 1.7% 11.5%
Asia 13.6% 14.3% 11.2%
--------- --------- ---------
Total gross margin 6.1% 8.5% 11.3%
--------- --------- ---------
Operating expenses:
Engineering 261 361 563
Selling, general and administrative 7,966 8,829 9,702
Amortization of intangible assets 469 469 520
Impairment and severance charges 956 1,991 (527)
--------- --------- ---------
Total operating expenses 9,652 11,650 10,258
--------- --------- ---------
Operating income (loss) (6,138) (6,649) 16
Other expense, net (1,088) (1,049) (1,189)
--------- --------- ---------
Loss before income taxes (7,226) (7,698) (1,173)
Provision for income taxes 909 579 728
--------- --------- ---------
Net loss (8,135) (8,277) (1,901)
Net loss attributable to non-controlling
interests 99 86 246
--------- --------- ---------
Net loss attributable to Merix common
shareholders $ (8,234) $ (8,363) $ (2,147)
========= ========= =========
Diluted net loss per share $ (0.38) $ (0.39) $ (0.10)
========= ========= =========
Diluted shares used in per share
calculations 21,614 21,573 20,794
========= ========= =========
MERIX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited) (unaudited) Per FY 2009
Revised (1) 10-K
May 30, 2009 May 30, 2009 May 30, 2009
------------ ------------ ------------
Assets:
Cash and short-term investments $ 21,353 $ 16,141 $ 17,571
Accounts receivable, net 42,219 43,290 43,285
Inventories, net 14,941 14,593 14,367
Assets held for sale 112 3 3
Deferred income taxes 160 160 160
Prepaid and other current assets 6,928 5,437 4,896
------------ ------------ ------------
Total current assets 85,713 79,624 80,282
Property, plant and equipment, net 89,458 95,170 95,883
Goodwill 11,392 11,392 11,392
Intangible assets, net 6,359 6,828 6,884
Deferred income taxes 521 521 612
Assets held for sale 1,146 1,146 1,146
Other assets 4,328 4,470 4,471
------------ ------------ ------------
Total assets $ 198,917 $ 199,151 200,670
============ ============ ============
Liabilities and Shareholders'
Equity:
Accounts payable $ 34,514 $ 33,371 33,263
Accrued liabilities 14,547 13,529 14,715
------------ ------------ ------------
Total current liabilities 49,061 46,900 47,978
Long-term debt 83,000 78,000 78,000
Other long-term liabilities 4,582 3,933 4,234
------------ ------------ ------------
Total liabilities 136,643 128,833 130,212
------------ ------------ ------------
Non-controlling interests 3,709 3,985 3,935
Shareholders' equity attributable to
Merix common shareholders 58,565 66,333 66,523
------------ ------------ ------------
Total shareholders' equity 62,274 70,318 70,458
------------ ------------ ------------
Total liabilities and
shareholders' equity $ 198,917 $ 199,151 200,670
============ ============ ============
(1) As revised to reflect elimination of one-month reporting lag for Asia
subsidiary.
MERIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
Fiscal quarter ended
------------------------
August 29, August 30,
2009 2008
----------- -----------
Cash flows from operating activities:
Net loss $ (8,135) $ (1,901)
Net adjustments to reconcile loss to net cash
provided by operating activitities:
Depreciation and amortization 5,833 5,457
Other non-cash items 1,108 (1)
Changes in working capital 1,813 5,578
----------- -----------
Net cash provided by operating activities 619 9,133
Cash flows from investing activities:
Purchases of property, plant and equipment (422) (9,421)
Proceeds from disposal of property, plant and
equipment 23 555
----------- -----------
Net cash used in investing activities (399) (8,866)
Cash flows from financing activities:
Borrowings on long-term notes payable 1,500 -
Net borrowings on revolving line of credit 3,500 -
Other financing activities, net (8) (57)
----------- -----------
Net cash used in financing activities 4,992 (57)
----------- -----------
Net change in cash and cash equivalents 5,212 210
Cash and cash equivalents
Beginning of period 16,141 5,728
----------- -----------
End of period $ 21,353 $ 5,938
=========== ===========
MERIX CORPORATION
DETAIL OF ADJUSTMENT TO RETAINED EARNINGS
ASIA SUBSIDIARY RESULTS OF OPERATIONS
AND CASH FLOWS - MAY 2009
(in thousands, except earnings per share data)
(Unaudited)
First quarter results are reported without the one-month reporting lag for
our Asia subsidiary which had been employed since its acquisition in 2005
through the end of fiscal 2009. Accordingly, the Asia results of
operations in the month of May 2009 were not included in either the fourth
quarter or first quarter results, but were recorded as a $0.2 million
adjustment to equity at the beginning of the current quarter, as detailed
below:
Four weeks
ended
May 30, 2009
--------------
Net sales $ 8,182
Cost of sales 7,389
--------------
Gross profit 793
--------------
Gross margin 9.7%
Operating expenses:
Engineering 56
Selling, general and administrative 510
Amortization of intangible assets 56
Severance and restructuring charges 197
--------------
Total operating expenses 819
--------------
Operating income (loss) (26)
Other expense, net (16)
--------------
Loss before income taxes and minority
interests (42)
Provision for income taxes 99
--------------
Net loss (141)
Net income attributable to
non-controlling interests 50
--------------
Net loss attributable to Merix common
shareholders $ (191)
==============
Cash flows from operating activities:
Net loss $ (141)
Net adjustments to reconcile loss
to net cash provided by operating
activitities:
Depreciation and amortization 792
Other non-cash items 91
Changes in working capital (611)
Change in due from affiliate (1,380)
--------------
Net cash used in operating
activities (1,249)
Cash flows from investing activities:
Purchases of property, plant and
equipment (181)
--------------
Net cash used in investing
activities (181)
Cash flows from financing activities -
--------------
Net change in cash and cash equivalents $ (1,430)
==============
SUPPLEMENTAL INFORMATION
NET SALES STATISTICS AND
CASH, AVAILABLE CREDIT AND BORROWINGS
(in thousands)
(Unaudited)
Three months ended
-------------------------------------------
August 29, August 30,
2009 May 30, 2009 2008
------------- ------------- -------------
Net Sales by End Markets:
Communications & Networking $ 19,529 34% $ 23,125 39% $ 38,776 43%
Automotive 12,773 22% 10,050 17% 19,413 21%
Computing & Peripherals 4,039 7% 4,074 7% 6,585 7%
Test, Industrial and
Medical 8,274 14% 9,300 16% 10,419 12%
Defense & Aerospace 7,157 13% 6,881 12% 7,223 8%
Other 6,025 10% 5,449 9% 8,211 9%
-------- --- -------- --- -------- ---
$ 57,797 100% $ 58,879 100% $ 90,627 100%
======== === ======== === ======== ===
Net Sales by Type:
Quick-Turn & Premium $ 11,496 20% $ 10,550 18% $ 17,979 20%
Full Lead Time 46,301 80% 48,329 82% 72,648 80%
-------- --- -------- --- -------- ---
$ 57,797 100% $ 58,879 100% $ 90,627 100%
======== === ======== === ======== ===
Top 5 Customers (as % of net
sales) 34% 35% 40%
======== ======== ========
Current Period Change in
Average Pricing Compared to: Three months ended
----------------------------
August 30,
May 30, 2009 2008
------------- -------------
North America -4% -2%
Asia -10% 3%
------------- -------------
Consolidated -11% -4%
============= =============
Current Period Change in Unit Three months ended
Volumes Compared to: ----------------------------
August 30,
May 30, 2009 2008
------------- -------------
North America 1% -40%
Asia 11% -33%
------------- -------------
Consolidated 10% -34%
============= =============
Cash, Borrowings and August 29, (Per 2009 10-K) August 30,
Credit Availability: 2009 May 30, 2009 2008
------------- ------------- -------------
Cash $ 21,353 $ 17,571 $ 5,938
Credit Availability 55,167 45,265 50,519
Outstanding Borrowings (13,000) (8,000) -
------------- ------------- -------------
Net Cash & Available
Credit 63,520 54,836 56,457
============= ============= =============
Merix Investor Relations Contact: Allen Muhich Vice President,
Finance 503.716.3700
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