Merix Corporation (NASDAQ: MERX) today announced consolidated
financial results for the fourth quarter of fiscal 2009 ended May
30, 2009.
Highlights
-- Continued improvements in Merix' underlying cost structure preserves
cash and liquidity, positioning the company well for an improvement in
business conditions
-- Meaningful sequential quarterly gross margin improvement, particularly
in Asia where gross margin improved to 14.3% of revenue
-- Significant new customer wins enable share growth in the Test,
Industrial & Medical and Defense & Aerospace end markets
-- Ended fiscal year with $17.6 million in cash and cash equivalents
-- The existing Bank of America credit facility, combined with the
recently announced China-based credit agreement, increases the company's
unused borrowing availability to $42.6 million, representing an $11.5
million increase compared to the third quarter further strengthening the
company's liquidity position
-- Excellent factory performance and further improvement in yields,
quality and customer delivery performance
Financial Results
The Company reported a net loss of $8.4 million or $0.39 per
diluted share on revenue of $58.9 million for the fourth quarter of
fiscal 2009, which compares to a net loss of $3.5 million or $0.17
per diluted share on revenue of $87.6 million in the fourth quarter
of fiscal 2008.
Included in the fiscal 2009 fourth quarter loss was $3.6 million
of non-recurring expense items comprised of the following:
-- $0.9 million of non-cash impairment charges associated with estimated
future Wood Village facility lease and property tax payments;
-- $1.1 million of severance payments related to previously announced
actions; and
-- $1.6 million of legal and professional costs primarily related to our
ongoing securities litigation efforts. It is anticipated that the future
quarterly expense rate associated with the securities litigation will be
significantly lower.
Commenting on the recent fourth quarter performance, Michael D.
Burger, President and Chief Executive Officer, said, "Our fourth
quarter revenue decreased 3% compared to the third quarter of
fiscal 2009 and we believe our demand is at or near the bottom of
this economic cycle. Our team has performed exceptionally well
given the roughly 30% revenue decline over the past year by
reducing costs while continuing to improve operating metrics and
support our customer needs. These improvements have reduced our
cash break even level to below $60 million of quarterly revenue. At
the same time we've continued to increase our liquidity by
expanding our existing Bank of America relationship and adding a
new China-based credit facility which together increases our
overall access to low cost capital."
Mr. Burger continued, "Despite the economic slowdown we believe
we are maintaining market share and beginning to win new projects
in a number of larger customer programs. These recent wins are a
testament that we have the right operational model which customers
value. With our stronger liquidity position, we're now refocusing
our efforts externally and increasing our intensity to leverage our
unique geographic footprint and market position. While we
anticipate success, predicting the timing is always a challenge and
therefore we currently anticipate first quarter revenues to
stabilize and remain relatively flat when compared to the fourth
quarter of fiscal 2009."
Merix' overall gross margins improved significantly from the
third quarter of fiscal 2009 and averaged 8.5% of revenue for the
fourth quarter compared to 10.7% and 1.4% in the fourth quarter of
fiscal 2008 and third quarter of fiscal 2009, respectively. The
significant margin improvement compared to the third quarter of
fiscal 2009 was due to the full-quarter impact of cost reduction
actions taken during the first few months of calendar 2009 and the
operational improvements achieved over the last several
quarters.
Operating expenses, exclusive of impairment, restructuring
charges and certain legal and professional expenses associated
primarily with our securities litigation process, totaled $8.1
million in the fourth quarter of fiscal 2009 compared to $9.8
million and $8.8 million in the fourth quarter of fiscal 2008 and
third quarter of fiscal 2009, respectively. The sequential
quarterly expense reduction of $0.7 million was also the result of
the full-quarter impact of cost reduction actions taken in the
first few months of calendar 2009.
Liquidity
Merix ended the fourth quarter of fiscal 2009 with $17.6 million
in cash and cash equivalents, near a 21 month high. Borrowings
under the Company's line of credit were unchanged from the third
quarter at $8.0 million with $37.3 million of remaining
availability under the line. Additionally, on June 29, 2009 Merix
announced a new credit agreement with Industrial and Commercial
Bank of China that provides an additional $5.3 million of low cost
borrowing capacity. Today, total unused and available borrowing
capacity equals $42.6 million representing an $11.5 million
increase from the third quarter of fiscal 2009.
Conference Call and Webcast Information
Merix will conduct a conference call and live webcast Monday,
July 13, 2009 at 2:00 p.m. PT. Management will discuss fourth
quarter fiscal 2009 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 5:00 pm PT
on July 13, 2009 and a telephone replay will be available from 4:00
pm PT on July 13, 2009 until 11:59 pm PT on Monday, July 20, 2009
by calling (320) 365-3844, access code 104349.
Use of Non-GAAP Financial Measures
"Non-GAAP Net Loss excluding Unusual Items" is disclosed in this
press release and is a non-GAAP financial measure. Management
believes the disclosure of this non-GAAP financial measure, when
presented in conjunction with the corresponding GAAP measures,
provide useful information to the Company, investors and other
users of the financial statements of the underlying operating
performance of the company for a given level of net sales.
Management believes this measure is important because it reflects
financial performance that is unencumbered by certain non-recurring
or unusual items. The Company has provided a reconciliation of this
measure to GAAP financial information in the attached
schedules.
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; changes in customer order levels, product mix and
inventory build-up; lower than expected or delayed sales; ability
to successfully restructure Merix Asia and complete the related
capital and technology expansion; the ability to successfully and
timely integrate the operations of Merix Asia; 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; 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 31,
2008 and Form 10-Q for the third quarter ended February 28, 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 Fiscal year ended
------------------------------- --------------------
May 30, Feb. 28, May 31, May 30, May 31,
2009 2009 2008 2009 2008
--------- --------- --------- --------- ---------
Net sales: $ 58,879 $ 60,721 $ 87,554 $ 287,127 $ 378,637
Cost of sales 53,878 59,845 78,185 264,941 340,778
--------- --------- --------- --------- ---------
Gross profit 5,001 876 9,369 22,186 37,859
Gross margin 8.5% 1.4% 10.7% 7.7% 10.0%
Operating expenses:
Engineering 361 500 523 2,121 1,810
Selling, general
and
administrative 9,298 8,867 9,322 36,896 43,268
Impairment and
severance
charges 1,991 22,342 (175) 24,895 15,686
--------- --------- --------- --------- ---------
Total
operating
expenses 11,650 31,709 9,670 63,912 60,764
--------- --------- --------- --------- ---------
Operating income
(loss) (6,649) (30,833) (301) (41,726) (22,905)
Other expense, net (1,049) (1,050) (1,723) (4,317) 21
--------- --------- --------- --------- ---------
Loss before income
taxes and minority
interests (7,698) (31,883) (2,024) (46,043) (22,884)
Provision for income
taxes 579 628 1,057 2,628 1,502
--------- --------- --------- --------- ---------
Loss before minority
interests (8,277) (32,511) (3,081) (48,671) (24,386)
Minority interests 86 155 458 593 1,165
--------- --------- --------- --------- ---------
Net loss $ (8,363) $ (32,666) $ (3,539) $ (49,264) $ (25,551)
========= ========= ========= ========= =========
Diluted net loss per
share $ (0.39) $ (1.54) $ (0.17) $ (2.34) $ (1.22)
========= ========= ========= ========= =========
Diluted shares used
in per share
calculations 21,573 21,170 21,072 21,098 21,019
========= ========= ========= ========= =========
MERIX CORPORATION
SUPPLEMENTAL INFORMATION
NET SALES, GROSS PROFIT & GROSS MARGIN BY SEGMENT
(in thousands)
(Unaudited)
Fiscal quarter ended Fiscal year ended
------------------------------- --------------------
May 30, Feb. 28, May 31, May 30, May 31,
2009 2009 2008 2009 2008
--------- --------- --------- --------- ---------
Net sales:
North America 27,274 28,807 45,495 137,149 203,202
Asia 31,605 31,914 42,059 149,978 175,435
--------- --------- --------- --------- ---------
Total net
sales $ 58,879 $ 60,721 $ 87,554 $ 287,127 $ 378,637
========= ========= ========= ========= =========
Gross profit:
North America 477 (2,386) 4,899 4,739 21,489
Asia 4,524 3,262 4,470 17,447 16,370
--------- --------- --------- --------- ---------
Total gross
profit $ 5,001 $ 876 $ 9,369 $ 22,186 $ 37,859
========= ========= ========= ========= =========
Gross margin:
North America 1.7% -8.3% 10.8% 3.5% 10.6%
Asia 14.3% 10.2% 10.6% 11.6% 9.3%
--------- --------- --------- --------- ---------
Total gross
margin 8.5% 1.4% 10.7% 7.7% 10.0%
========= ========= ========= ========= =========
MERIX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
May 30, 2009 May 31, 2008
------------ ------------
Assets:
Cash and short-term investments $ 17,571 $ 5,728
Accounts receivable, net 43,285 73,153
Inventories, net 14,367 23,631
Assets held for sale 3 1,477
Deferred income taxes 160 75
Prepaid and other current assets 4,896 12,961
------------ ------------
Total current assets 80,282 117,025
Property, plant and equipment, net 95,883 103,012
Goodwill 11,392 31,794
Intangible assets, net 6,884 8,866
Deferred income taxes 612 885
Assets held for sale 1,146 -
Other assets 4,471 5,859
------------ ------------
Total assets $ 200,670 $ 267,441
============ ============
Liabilities and Shareholders' Equity:
Accounts payable $ 33,263 $ 59,789
Accrued liabilities 14,715 15,783
------------ ------------
Total current liabilities 47,978 75,572
Long-term debt 78,000 70,000
Other long-term liabilities 4,234 3,522
------------ ------------
Total liabilities 130,212 149,094
------------ ------------
Minority interests 3,935 4,573
Shareholders' equity 66,523 113,774
------------ ------------
Total liabilities and shareholders' equity $ 200,670 $ 267,441
============ ============
MERIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
Fiscal quarter ended Fiscal year ended
-------------------- --------------------
May 30, May 31, May 30, May 31,
2009 2008 2009 2008
--------- --------- --------- ---------
Cash flows from operating
activities:
Net loss $ (8,363) $ (3,539) $ (49,264) $ (25,551)
Net adjustments to
reconcile loss to net cash
provided by operating
activitities:
Depreciation and
amortization 5,783 4,761 22,605 20,992
Other non-cash items 1,395 1,943 23,997 11,995
Changes in working capital 536 705 25,343 4,633
--------- --------- --------- ---------
Net cash provided by
operating activities (649) 3,870 22,681 12,069
Cash flows from investing
activities:
Purchases of property, plant
and equipment (874) (8,645) (19,005) (28,394)
Proceeds from disposal of
property, plant and
equipment 27 255 988 278
Net changes in investments - - - 9,025
--------- --------- --------- ---------
Net cash used in
investing activities (847) (8,390) (18,017) (19,091)
Cash flows from financing
activities:
Principal payments on
long-term borrowings - - - (2,500)
Principal payments on capital
lease obligations - - - (438)
Net borrowings on revolving
line of credit - - 8,000 -
Other financing activities,
net (17) (177) (821) (1,487)
--------- --------- --------- ---------
Net cash used in
financing activities (17) (177) 7,179 (4,425)
--------- --------- --------- ---------
Net change in cash and cash
equivalents (1,513) (4,697) 11,843 (11,447)
Cash and cash equivalents
Beginning of period 19,084 10,425 5,728 17,175
--------- --------- --------- ---------
End of period $ 17,571 $ 5,728 $ 17,571 $ 5,728
========= ========= ========= =========
SUPPLEMENTAL INFORMATION
NET SALES STATISTICS
(in thousands)
(Unaudited)
Three months ended
----------------------------------------------
May 30, 2009 Feb. 28, 2009 May 31, 2008
-------------- -------------- --------------
Net Sales by End Markets:
Communications &
Networking $ 23,125 39% $ 24,917 41% $ 36,626 43%
Automotive 10,050 17% 11,511 19% 21,255 19%
Computing & Peripherals 4,074 7% 4,725 8% 6,046 10%
Test, Industrial and
Medical 9,300 16% 7,153 12% 8,844 10%
Defense & Aerospace 6,881 12% 5,998 10% 7,641 7%
Other 5,449 9% 6,417 10% 7,142 11%
-------------- -------------- --------------
$ 58,879 100% $ 60,721 100% $ 87,554 100%
============== ============== ==============
Net Sales by Type:
Quick-Turn & Premium $ 10,550 18% $ 9,959 16% $ 17,350 20%
Full Lead Time 48,329 82% 50,762 84% 70,204 80%
-------------- -------------- --------------
$ 58,879 100% $ 60,721 100% $ 87,554 100%
============== ============== ==============
Top 5 Customers (as % of
net sales) 35% 37% 43%
========= ========= =========
Current Period Change in
Average Pricing
Compared to: Three months ended
----------------------------
February 28, May 30,
2009 2008
------------- -------------
North America 1% 9%
Asia 8% 16%
------------- -------------
Consolidated 5% 6%
============= =============
Current Period Change in
Unit Volumes Compared to: Three months ended
----------------------------
February 28, May 30,
2009 2008
------------- -------------
North America -7% -45%
Asia -8% -36%
------------- -------------
Consolidated -8% -36%
============= =============
Cash, Borrowings and
Credit Availability: May 30, 2009 Feb. 28, 2009 May 31, 2008
-------------- -------------- --------------
Cash 17,571 19,084 5,728
Credit Availability 45,265 39,070 43,000
Outstanding Borrowings (8,000) (8,000) -
--------- --------- ----------
Net Cash & Available
Credit 54,836 (1) 50,154 48,728
========= ========= ==========
Fiscal year ended
------------------------------
May 30, 2009 May 31, 2008
-------------- --------------
Net Sales by End Markets:
Communications &
Networking $ 116,482 41% $ 159,535 42%
Automotive 58,423 21% 79,838 20%
Computing & Peripherals 21,368 8% 32,111 9%
Test, Industrial and
Medical 36,238 12% 40,866 11%
Defense & Aerospace 27,401 9% 26,468 7%
Other 27,215 9% 39,819 11%
-------------- --------------
$ 287,127 100% $ 378,637 100%
============== ==============
Net Sales by Type:
Quick-Turn & Premium $ 51,646 18% $ 85,117 22%
Full Lead Time 235,481 82% 293,520 78%
-------------- --------------
$ 287,127 100% $ 378,637 100%
============== ==============
Top 5 Customers (as % of
net sales) 37% 36%
========= =========
Current Period Change in
Average Pricing Fiscal year
Compared to: ended
-------------
May 30, 2008
-------------
North America 8%
Asia 10%
-------------
Consolidated -0.3%
=============
Current Period Change in Fiscal year
Unit Volumes Compared to: ended
-------------
May 30, 2008
-------------
North America -37%
Asia -23%
-------------
Consolidated -24%
=============
(1) Excludes $5.3 million available under credit facility entered into
with Industrial and Commerical Bank of China on June 26, 2009.
SUPPLEMENTAL INFORMATION
Non-GAAP Net Loss and
Cash, Available Credit and Borrowings
(in thousands)
(Unaudited)
Three months ended
------------------------------------------- ---------
Fiscal 2009
Non-GAAP Net May 30, Feb. 28, Nov. 29, Aug. 30, Fiscal
Loss: 2009 2009 2008 2008 Year 2009
---------- --------- --------- --------- ---------
Net loss (GAAP) $ (8,363) $ (32,666) $ (6,088) $ (2,147) $ (49,264)
Adjustments to net
loss:
Employee
severance and
other
restructuring 1,122 1,620 387 40 3,169
(Gain)/loss on
disposal of
surplus assets - - 702 (567) 135
Wood Village
closure 869 222 - - 1,091
Goodwill
impairment - 20,500 - - 20,500
Securities
litigation and
other
professional
fees 1,565 523 - - 2,088
Non-GAAP net
loss,
excluding
unusual ---------- --------- --------- --------- ---------
items $ (4,807) $ (9,801) $ (4,999) $ (2,674) (22,281)
========== ========= ========= ========= =========
Three months ended
------------------------------------------- ---------
Fiscal 2008
Non-GAAP Net May 31, Mar. 1, Dec. 1, Sep. 1, Fiscal
Loss: 2008 2008 2007 2007 Year 2008
---------- --------- --------- --------- ---------
Net loss (GAAP) $ (3,539) $ (13,354) $ (5,009) $ (3,649) (25,551)
Adjustments to net
loss:
Employee
severance and
other
restructuring 374 1,781 885 241 3,281
(Gain)/loss on
disposal of
surplus assets (301) - - - (301)
Wood Village
closure and
impairment (490) 12,767 - - 12,277
Asia asset
impairment 242 92 95 - 429
Huizhou
deferred tax
reversal - (960) - - (960)
Gain on
settlement of
Asia
acquisition -
acquisition
note
payable - (5,094) - - (5,094)
Write-off of
deferred
financing
costs 476 - - - 476
Non-GAAP net
loss,
excluding
unusual ---------- --------- --------- --------- ---------
items $ (3,238) $ (4,768) $ (4,029) $ (3,408) (15,443)
========== ========= ========= ========= =========
Cash Borrowings
and Credit May 30, Feb. 28, Nov. 29, Aug. 30, May 31,
Availability: 2009 2009 2008 2008 2008
---------- --------- --------- --------- ---------
Cash 17,571 19,084 11,483 5,938 5,728
Borrowing base 45,265 39,070 42,944 50,519 43,000
Outstanding
borrowings (8,000) (8,000) (6,983) - -
---------- --------- --------- --------- ---------
Net Cash &
Available
Credit 54,836(1) 50,154 47,444 56,457 48,728
========== ========= ========= ========= =========
(1) Excludes $5.3 million available under credit facility entered into
with Industrial and Commerical Bank of China on June 26, 2009.
Merix Investor Relations Contact: Allen Muhich Vice President,
Finance 503.716.3700
Merix (MM) (NASDAQ:MERX)
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