Merix Corporation (NASDAQ: MERX) today announced consolidated
financial results for the second quarter of fiscal 2010 ended
November 28, 2009.
Highlights
-- Sequential quarterly revenue growth of 23% was evenly balanced
between the Company's North America and Asia operating segments with 24%
and 22% growth, respectively
-- Growth in the strategic Defense and Aerospace segment grew 26%
sequentially to its highest level in Company history
-- Second quarter book to bills of 1.11 in North America and 1.12
in Asia
-- Gross margins more than doubled to 12.7% of revenue
-- Net income of $0.5 million represents an $8.7 million
sequential quarterly improvement and the Company's first profitable quarter
since February 2007
Financial Results
The Company reported net income of $0.5 million, or $0.02 per
diluted share, on revenue of $71.3 million for the second quarter
of fiscal 2010, which compares to a net loss of $6.1 million, or
$0.29 per diluted share, on revenue of $76.9 million in the second
quarter of fiscal 2009. Included in the fiscal 2010 second quarter
income was $1.5 million of special items related to income tax
benefits and the reversal of a customs penalty accrual, partially
offset by professional fees primarily relating to the recently
announced merger with Viasystems Group, Inc.
Commenting on the recent second quarter performance, Michael D.
Burger, President and Chief Executive Officer, said, "We are
extremely pleased with our second quarter financial performance.
The increased order activity we reported last quarter extended
throughout the second quarter, resulting in 23% sequential quarter
revenue growth and a strong book to bill of 1.12. Our results also
benefited from exceptional factory performance and continued cost
management, resulting in over 40% of our sequential quarterly
revenue increase flowing through to the bottom line."
Looking ahead Mr. Burger commented, "December demand
traditionally trends downward due to the Christmas and New Year's
holidays; however, despite these seasonal factors, we have
continued to see very good bookings during the month of December.
Visibility is still somewhat limited, but we remain optimistic
about third quarter North America and Asia demand due to our
increased backlog coupled with extended lead times. Production
volumes in both North America and Asia will be affected by limited
holiday down-times during our third quarter."
Merix' overall second quarter gross margins averaged 12.7% of
revenue compared to 7.8% and 6.1% in the second quarter of fiscal
2009 and first quarter of fiscal 2010, respectively. The dramatic
improvement in both North America and Asia gross margins is
primarily due to improved factory utilization resulting from
increased revenue levels combined with the cost structure and
efficiency improvements made during the last twelve months.
Operating expenses totaled $9.7 million in both the first and
second quarters of fiscal 2010. Exclusive of non-recurring items,
primarily associated with our pending merger with Viasystems Group,
Inc. and restructuring actions, operating expenses totaled $8.1
million in the second quarter of fiscal 2010 compared to $8.0
million in the first quarter of fiscal 2010, respectively.
The Company's balance sheet is healthy. Working capital metrics
are excellent with count back DSO improving three days to 62 days,
inventory turns were nearly 15 times per year and DPO increased
three days to 61 days. The Company also reduced its bank borrowings
by $5 million during the quarters. Liquidity, which the Company
defines as cash on hand plus amounts available to be borrowed under
its two bank credit facilities, remained relatively unchanged at
approximately $60 million.
Earlier today, the Company announced the signing of a binding
agreement to sell its idle Hong Kong property. The sale is
contingent upon approval by the Hong Kong Science and Technology
Park and the buyer completing required financing. Upon closing, the
Company expects to receive approximately $9.5 million in net
proceeds from the sale and it is anticipated to close in the spring
of 2010.
Conference Call and Webcast Information
Merix will conduct a conference call and live webcast Monday,
January 4, 2010 at 2:00 p.m. PT. Management will discuss second
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 4:00 p.m.
PT on January 4, 2010 and a telephone replay will be available from
4:00 p.m. PT on January 4, 2010 until 11:59 pm PT on Monday,
January 11, 2010 by calling (320) 365-3844, access code 139863.
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," "remains optimistic" 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 first quarter report filed on Form 10-Q for the period
ended August 29, 2009, Annual Report on Form 10-K for the year
ended May 30, 2009 and amended Form S-4 filed December 29, 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 Six months ended
------------------------------- --------------------
Nov. 28, Aug. 29, Nov. 29, Nov. 28, Nov. 29,
2009 2009 2008 2009 2008
--------- --------- --------- --------- ---------
Net sales:
North America $ 32,735 $ 26,297 $ 36,151 $ 59,032 $ 81,068
Asia 38,563 31,500 40,749 70,063 86,459
--------- --------- --------- --------- ---------
Total net
sales 71,298 57,797 76,900 129,095 167,527
Cost of sales:
North America 29,411 27,068 34,667 56,479 74,420
Asia 32,805 27,215 36,198 60,020 76,798
--------- --------- --------- --------- ---------
Total cost of
sales 62,216 54,283 70,865 116,499 151,218
--------- --------- --------- --------- ---------
Gross profit:
North America 3,324 (771) 1,484 2,553 6,648
Asia 5,758 4,285 4,551 10,043 9,661
--------- --------- --------- --------- ---------
Total gross
proft 9,082 3,514 6,035 12,596 16,309
--------- --------- --------- --------- ---------
Gross margin:
North America 10.2% -2.9% 4.1% 4.3% 8.2%
Asia 14.9% 13.6% 11.2% 14.3% 11.2%
--------- --------- --------- --------- ---------
Total gross
margin 12.7% 6.1% 7.8% 9.8% 9.7%
--------- --------- --------- --------- ---------
Operating expenses:
Engineering 343 261 697 604 1,260
Selling, general
and
administrative 8,865 7,966 7,989 16,831 17,691
Amortization of
intangible
assets 469 469 520 938 1,040
Impairment and
severance
charges - 956 1,089 956 562
--------- --------- --------- --------- ---------
Total
operating
expenses 9,677 9,652 10,295 19,329 20,553
--------- --------- --------- --------- ---------
Operating income
(loss) (595) (6,138) (4,260) (6,733) (4,244)
Other income
(expense), net 476 (1,088) (1,029) (612) (2,218)
--------- --------- --------- --------- ---------
Loss before income
taxes (119) (7,226) (5,289) (7,345) (6,462)
Provision for
(benefit from)
income taxes (1,014) 909 693 (105) 1,421
--------- --------- --------- --------- ---------
Net income (loss) 895 (8,135) (5,982) (7,240) (7,883)
Net income
attributable to
non-controlling
interests 431 99 106 530 352
--------- --------- --------- --------- ---------
Net income (loss)
attributable to
Merix common
shareholders $ 464 $ (8,234) $ (6,088) $ (7,770) $ (8,235)
========= ========= ========= ========= =========
Diluted net income
(loss) per share $ 0.02 $ (0.38) $ (0.29) $ (0.36) $ (0.39)
========= ========= ========= ========= =========
Diluted shares used
in per share
calculations 22,296 21,614 20,945 21,621 20,867
========= ========= ========= ========= =========
MERIX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited) (unaudited) Per FY 2009
Revised (1) 10-K
November May 30, May 30,
28, 2009 2009 2009
----------- ----------- -----------
Assets:
Cash and short-term investments $ 10,472 $ 16,141 $ 17,571
Accounts receivable, net 53,523 43,290 43,285
Inventories, net 17,203 14,593 14,367
Assets held for sale 112 3 3
Deferred income taxes 265 160 160
Prepaid and other current assets 9,703 5,437 4,896
----------- ----------- -----------
Total current assets 91,278 79,624 80,282
Property, plant and equipment, net 85,283 95,170 95,883
Goodwill 11,392 11,392 11,392
Intangible assets, net 5,890 6,828 6,884
Deferred income taxes 1,656 521 612
Assets held for sale 1,146 1,146 1,146
Other assets 4,062 4,470 4,471
----------- ----------- -----------
Total assets $ 200,707 $ 199,151 $ 200,670
=========== =========== ===========
Liabilities and Shareholders' Equity:
Accounts payable $ 41,866 $ 33,371 $ 33,263
Accrued liabilities 12,521 13,088 14,715
----------- ----------- -----------
Total current liabilities 54,387 46,459 47,978
Long-term debt 78,000 78,000 78,000
Other long-term liabilities 4,771 4,374 4,234
----------- ----------- -----------
Total liabilities 137,158 128,833 130,212
----------- ----------- -----------
Non-controlling interests 4,140 3,985 3,935
Shareholders' equity attributable to
Merix common shareholders 59,409 66,333 66,523
----------- ----------- -----------
Total shareholders' equity 63,549 70,318 70,458
----------- ----------- -----------
Total liabilities and shareholders'
equity $ 200,707 $ 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 Six months ended
------------------ ------------------
Nov. 28, Nov. 29, Nov. 28, Nov. 29,
2009 2008 2009 2008
-------- -------- -------- --------
Cash flows from operating
activities:
Net income (loss) $ 895 $ (5,982) $ (7,240) $ (7,883)
Net adjustments to reconcile
loss to net cash provided
by operating activitities:
Depreciation and
amortization 5,520 5,668 11,353 11,125
Other non-cash items (2,983) 1,062 (1,875) 1,060
Changes in working capital (8,294) 3,208 (6,481) 8,786
-------- -------- -------- --------
Net cash provided by
operating activities (4,862) 3,956 (4,243) 13,088
Cash flows from investing
activities:
Purchases of property, plant and
equipment (647) (5,423) (1,069) (14,844)
Proceeds from disposal of
property, plant and equipment 5 44 28 599
-------- -------- -------- --------
Net cash used in investing
activities (642) (5,379) (1,041) (14,245)
Cash flows from financing
activities:
Borrowings on long-term notes
payable 8,700 - 10,200 -
Net borrowings on revolving line
of credit (13,700) 6,983 (10,200) 6,983
Other financing activities, net (377) (15) (385) (71)
-------- -------- -------- --------
Net cash used in financing
activities (5,377) 6,968 (385) 6,912
-------- -------- -------- --------
Net change in cash and cash
equivalents (10,881) 5,545 (5,669) 5,755
Cash and cash equivalents
Beginning of period 21,353 5,938 16,141 5,728
-------- -------- -------- --------
End of period $ 10,472 $ 11,483 $ 10,472 $ 11,483
======== ======== ======== ========
SUPPLEMENTAL INFORMATION
NET SALES STATISTICS
(in thousands)
(Unaudited)
Three months ended
-------------------------------------------------
Nov. 28, 2009 Aug. 29, 2009 Nov. 29, 2008
--------------- --------------- ---------------
Net Sales by End
Markets:
Communications &
Networking $ 24,427 34% $ 19,529 41% $ 29,664 39%
Automotive 15,334 21% 12,773 19% 17,449 23%
Computing &
Peripherals 6,096 9% 4,039 8% 5,984 8%
Test, Industrial and
Medical 11,104 16% 8,274 12% 9,366 12%
Defense & Aerospace 9,007 13% 7,157 10% 7,299 9%
Other 5,330 7% 6,025 10% 7,138 9%
--------- ---- --------- ---- --------- ----
$ 71,298 100% $ 57,797 100% $ 76,900 100%
========= ==== ========= ==== ========= ====
Net Sales by Type:
Quick-Turn & Premium $ 13,403 19% $ 11,496 20% $ 13,158 17%
Full Lead Time 57,895 81% 46,301 80% 63,742 83%
--------- ---- --------- ---- --------- ----
$ 71,298 100% $ 57,797 100% $ 76,900 100%
========= ==== ========= ==== ========= ====
Top 5 Customers (as % of
net sales) 31% 34% 36%
========= ========= =========
Six months ended
--------------------------------
Nov. 28, 2009 Nov. 29, 2008
--------------- ---------------
Net Sales by End
Markets:
Communications &
Networking $ 43,956 34% $ 68,440 42%
Automotive 28,107 22% 36,862 20%
Computing &
Peripherals 10,135 8% 12,569 9%
Test, Industrial and
Medical 19,378 15% 19,785 11%
Defense & Aerospace 16,164 12% 14,522 7%
Other 11,355 9% 15,349 11%
--------- ---- --------- ----
$ 129,095 100% $ 167,527 100%
========= ==== ========= ====
Net Sales by Type:
Quick-Turn & Premium $ 24,899 19% $ 31,137 19%
Full Lead Time 104,196 81% 136,390 81%
--------- ---- --------- ----
$ 129,095 100% $ 167,527 100%
========= ==== ========= ====
Top 5 Customers (as % of
net sales) 32% 38%
========= =========
Current Period Change in
Average Pricing Six months
Compared to: Three months ended ended
------------------------------ --------------
Aug. 29, 2009 Nov. 29, 2008 Nov. 29, 2008
-------------- -------------- --------------
North America 3% 3% 0%
Asia 2% 2% 3%
-------------- -------------- --------------
Consolidated 3% 0% -2%
============== ============== ==============
Current Period Change in
Unit Volumes Six months
Compared to: Three months ended ended
------------------------------ --------------
Aug. 29, 2009 Nov. 29, 2008 Nov. 29, 2008
-------------- -------------- --------------
North America 21% -12% -27%
Asia 20% -7% -21%
-------------- -------------- --------------
Consolidated 20% -7% -21%
============== ============== ==============
SUPPLEMENTAL INFORMATION
Non-GAAP Net Loss and
Cash, Borrowings and Credit Availability
(in thousands)
(Unaudited)
Three months ended Six months ended
---------------------------- ------------------
Nov. 28, Aug. 29, Nov. 29, Nov. 28, Nov. 29,
Non-GAAP Net Loss: 2009 2009 2008 2009 2008
-------- -------- -------- -------- --------
Net income (loss)
attributable to Merix
shareholders (GAAP) $ 464 $ (8,234) $ (6,088) $ (7,770) $ (8,235)
Adjustments to net income
(loss):
Employee severance and
other restructuring - 314 387 314 427
(Gain)/loss on
disposal of surplus
assets - 642 702 642 135
Alternative minimum
tax refund - tax law
change (580) - - (580) -
Reversal of deferred
tax valuation
allowance (1,240) - - (1,240) -
VAT penalty -
contingent liability
reversal (1,522) - - (1,522) -
Non-controlling
interest in
adjustments 260 - - 260 -
Securities litigation
and merger
transaction
professional fees 1,580 690 - 2,270 -
Non-GAAP net loss,
excluding unusual -------- -------- -------- -------- --------
items $ (1,038) $ (6,588) $ (4,999) $ (7,626) $ (7,673)
======== ======== ======== ======== ========
9,677 9,652 10,295
Cash, Borrowings and Nov. 28, Aug. 29, Nov. 29,
Credit Availability: 2009 2009 2008
-------- -------- --------
Cash $ 10,472 $ 21,353 $ 11,483
Borrowing base 57,413 49,867 49,927
Outstanding borrowings (8,000) (13,000) (6,983)
-------- -------- --------
Net Cash &
Available Credit $ 59,885 $ 58,220 $ 54,427
======== ======== ========
Merix Investor Relations Contact: Allen Muhich Vice President,
Finance 503.716.3700
Merix (MM) (NASDAQ:MERX)
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