Merix Corporation (Nasdaq:MERX) today announced consolidated
financial results for the quarter and year ended May 27, 2006.
Sales for the fourth quarter increased 95% to $100.4 million
compared to $51.6 million for the fourth quarter of fiscal 2005,
due primarily to the inclusion of sales activity for Merix Asia
which was acquired in September 2005 along with growth in its
quick-turn services business and increased premium opportunities.
On a GAAP basis, net income in the fourth quarter of fiscal 2006
was $3.5 million or $0.17 per diluted share compared to a net loss
of $1.7 million or $0.09 per share in the fourth quarter of fiscal
2005. On a non-GAAP basis, Merix had income of $3.9 million, or
$0.19 per diluted share, in the fourth quarter of fiscal 2006
compared to a non-GAAP loss of $124 thousand, or $0.01 per share,
in the fourth quarter of fiscal 2005. Sales for the fiscal year
2006 increased approximately 65% to $309.0 million, compared to
$187.0 million for fiscal 2005. The increase in sales is primarily
attributable to the acquisition of Merix Asia in September 2005 as
well as the December 2004 acquisition of Merix San Jose. On a GAAP
basis, the Company had net income of $1.4 million or $0.07 per
share in fiscal 2006, compared to a net loss of $2.6 million or
$0.14 per share in fiscal 2005. On a non-GAAP basis, Merix had
income of $8.0 million, or $0.41 per diluted share, for the fiscal
year 2006 compared to a non-GAAP loss of $88 thousand, or $0.00 per
share, for the fiscal year 2005. "Fiscal 2006 was a
transformational year for Merix," said Mark Hollinger, Chairman and
Chief Executive Officer of Merix Corporation. "We achieved records
this year in consolidated revenues and quick-turn sales. The
strength of our strategy of establishing a diversified, global
manufacturing footprint through the acquisition of Merix Asia
combined with our focused expansion of quick-turn capability in
North America was demonstrated in the operating results for this
period." Hollinger added, "As we continue the integration of our
Asian operations, we are gaining traction on cross-selling
opportunities with continued program wins from traditional Merix
customers to be serviced from our Asian factories and Merix Asia
customers utilizing our North American quick-turn capability. At
the same time we continue to enhance our customer service globally
through advances in our technology offerings. We continue to
diversify our customer base and industry end markets as part of our
growth initiatives." Adjusted EBITDA (earnings before interest,
taxes, depreciation and amortization, adjusted for one-time
acquisition related and debt restructuring charges) was $12.9
million in the fourth quarter of fiscal 2006 and $33.0 million for
the fiscal year 2006. This is compared to EBITDA of $2.7 million
for the fourth quarter of fiscal 2005 and $12.4 million for the
fiscal year 2005. Merix generated cash from operations of $8.4
million in the fourth quarter. Cash and short-term investments were
$31.1 million at the end of the quarter, which was a decrease from
the end of fiscal year 2005 due to the use of cash for the Merix
Asia acquisition. Total debt increased to $99.0 million at the end
of the quarter compared to $27.0 million at the end of fiscal 2005
as a result of incurring additional debt to finance the acquisition
of Merix Asia. Debt, net of cash and investments at the end of the
fourth quarter fiscal 2006 was $67.9 million, down from $70.7
million at the end of the third quarter of fiscal 2006. Incremental
borrowing capacity under revolving lines of credit was $36.8
million at the end of the fourth quarter fiscal 2006, compared to
$18.1 million at the end of the third quarter 2006. In May 2006,
Merix issued $70.0 million in 4% convertible debentures, using the
net proceeds to redeem the $25 million 6.5% convertible debenture,
prepay and cancel the $30 million Asian Credit Agreement and reduce
approximately $12.0 million in outstanding borrowings under its
domestic revolving line of credit. The Company expects to save up
to $2.0 million in annual interest expense as a result of this
refinancing transaction and will also benefit from a simplified
capital structure, elimination of debt covenants and extension of
debt maturity to seven years. Business Outlook For the first
quarter of fiscal 2007, Merix expects sales to range between $102.0
million and $106.0 million with GAAP net income of between $5.2
million and $6.1 million or between $0.25 and $0.30 per diluted
share. GAAP net income includes an estimated $500 thousand for
stock option expense required to be recorded beginning in our
fiscal 2007 under SFAS No.123(R). Non-GAAP earnings are expected to
range between $6.3 million and $7.2 million or between $0.31 and
$0.35 per diluted share and exclude stock option expense and
amortization of identifiable intangibles. EBITDA, adjusted to
eliminate stock option expense, in the first quarter is expected to
range between $13.3 million and $14.3 million. Commenting on the
outlook, Hollinger stated, "We continue to see strength in our
global markets through the first quarter of fiscal 2007 and we
expect to progress towards achieving our longer term gross margin
goal of 22% to 24%." Hollinger concluded, "Our focus for fiscal
2007 will be to: -- Accelerate the realization of our global sales
and operating synergies -- Increase our quick-turn market share --
Expand our technological capability in Asia -- Enhance throughput
in all factories -- Optimize our sales mix We believe that progress
in these areas will better position us for sustained growth and a
global competitive advantage" Conference Call and Webcast
Information Merix will conduct a conference call and live webcast
on Thursday, June 29 at 5:30 am PT. To access the webcast, log on
to www.merix.com. A replay of the webcast will be available
beginning at 8:30 am PT on June 29, 2006. A phone replay will be
available until approximately 10:00 am PT on July 5, 2006 by
calling 719-457-0820, access code 4675431. Use of Non-GAAP
Financial Measures In fiscal 2006, Merix defined its non-GAAP
income as GAAP net income before amortization of identifiable
intangibles, inventory purchase accounting adjustments resulting
from acquisitions, the write-off of unamortized deferred financing
charges, debt restructuring charges and the earnings effect of the
valuation allowance against deferred taxes. In fiscal 2007,
non-GAAP income will be defined as GAAP net income before
amortization of identifiable intangibles and stock option expense.
Management believes the excluded items are not representative of
underlying trends in the Company's operating performance and that
excluding them provides investors with additional information to
assess the Company's results over multiple periods and compare the
Company's results with the results of its competitors. See Related
Financial Highlights in this earnings release for a reconciliation
of GAAP to non-GAAP results. About Merix Merix is a leading
manufacturer of technologically advanced, multilayer, rigid printed
circuit boards for use in sophisticated electronic equipment. Merix
provides quick-turn prototype, pre-production and volume board
production to its customers. Principal markets served by Merix
include data communications and wireless telecommunications,
automotive, high-end computing, and test and measurement 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 the first quarter of fiscal 2007 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," "goal" and other similar
expressions, are based on current expectations, estimates,
assumptions and projections that are subject to change, and 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: changes
in customer order levels, product mix and inventory build-up; lower
than expected or delayed sales; the ability to realize the
anticipated benefits or synergies of the Merix Asia acquisition in
a timely manner or at all; fluctuations in demand for products and
services of the company, including quick-turn and premium services;
the introduction of new products or technologies by competitors;
the ability to successfully and timely integrate the operations of
Merix Asia; 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; foreign currency risk; 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 control or pass through increases in
the cost of raw materials and supplies; 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 28,
2005. Merix Corporation does not undertake to update any such
factors or to publicly announce developments or events relating to
the matters described herein. -0- *T MERIX CORPORATION CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except
earnings per share data, unaudited) Three Months Twelve Months
Ended Ended ------------------ ------------------- May 27, May 28,
May 27, May 28, 2006 2005 2006 2005 --------- -------- ---------
--------- Net sales $100,393 $51,612 $308,982 $186,994 Cost of
sales 77,877 45,320 254,864 163,205 --------- -------- ---------
--------- Gross profit 22,516 6,292 54,118 23,789 Engineering 2,008
1,781 6,655 6,774 Selling, general and administrative 10,846 5,537
33,353 18,278 Amortization of identifiable intangibles 674 739
3,106 1,374 Severance and impairment charges - - 1,135 - ---------
-------- --------- --------- Total operating expense 13,528 8,057
44,249 26,426 Operating income (loss) 8,988 (1,765) 9,869 (2,637)
Debt restructuring costs (1,820) - (1,820) - Interest and other
income (expense), net (3,302) 62 (5,785) 35 --------- --------
--------- --------- Income (loss) before taxes and minority
interest expense 3,866 (1,703) 2,264 (2,602) Income tax expense
(16) 7 433 8 --------- -------- --------- --------- Net income
(loss) before minority interest expense 3,882 (1,710) 1,831 (2,610)
Minority interest expense 368 - 399 - --------- -------- ---------
--------- Net income (loss) $3,514 $(1,710) $1,432 $(2,610)
========= ======== ========= ========= Net income (loss) per
diluted share $0.17 $(0.09) $0.07 $(0.14) ========= ========
========= ========= Shares used in per share calculations 20,507
19,318 19,715 19,224 ========= ======== ========= ========= MERIX
CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands,
unaudited) May 27, May 28, 2006 2005 --------- --------- Assets
Cash and short-term investments $31,141 $77,685 Accounts
receivable, net 75,379 37,338 Inventories 24,384 11,227 Assets held
for sale 1,987 - Other current assets 8,090 2,451 ---------
--------- Total current assets 140,981 128,701 Property, plant and
equipment, net 122,862 88,132 Goodwill 89,394 25,551 Identifiable
intangibles, net 13,916 9,754 Other assets 11,282 1,803 ---------
--------- Total assets $378,435 $253,941 ========= =========
Liabilities and Shareholders' Equity Accounts payable $47,260
$16,957 Other accrued liabilities 11,106 4,767 Accrued compensation
11,487 4,721 Accrued warranty 2,319 1,519 Income taxes payable - 6
Current portion of long-term debt 7,607 1,000 --------- ---------
Total current liabilities 79,779 28,970 Long-term debt 91,377
26,000 Other long-term liability 1,036 960 --------- ---------
Total liabilities 172,192 55,930 Minority interest liability 4,118
- Shareholders' equity 202,125 198,011 --------- --------- Total
liabilities and shareholders' equity $378,435 $253,941 =========
========= MERIX CORPORATION RELATED FINANCIAL HIGHLIGHTS (dollars
and shares in thousands, except EPS, unaudited)
----------------------------------------------------------------------
Q4 05 Q3 06 Q4 06
----------------------------------------------------------------------
SUMMARY OPERATING RESULTS
----------------------------------------------------------------------
Net sales 100.0% $51,612 100.0% $95,130 100.0% $100,393 Cost of
sales 87.8% 45,320 82.6% 78,559 77.6% 77,877 Gross margin 12.2%
6,292 17.4% 16,571 22.4% 22,516 Engineering expense 3.5% 1,781 1.8%
1,756 2.0% 2,008 Selling, general & administrative expense
10.7% 5,537 11.5% 10,909 10.8% 10,846 Amortization of identifiable
intangibles 1.4% 739 0.9% 854 0.7% 674 Total operating expense
15.6% 8,057 14.2% 13,519 13.5% 13,528 Operating income (loss) -3.4%
(1,765) 3.2% 3,052 9.0% 8,988 Debt restructuring costs 0.0% - 0.0%
- -1.8% (1,820) Interest and other income (expense), net 0.1% 62
-1.9% (1,834) -3.3% (3,302) Income (loss) before taxes and minority
interest -3.3% (1,703) 1.3% 1,218 3.9% 3,866 Net income (loss)
-3.3% (1,710) 0.9% 809 3.5% 3,514 Effective tax rate 0.0% -32.1%
0.4% Shares for diluted EPS 19,318 19,766 20,507 Diluted income
(loss) per share ($0.09) $0.04 $0.17
----------------------------------------------------------------------
SALES BY END MARKETS (% of Sales)
----------------------------------------------------------------------
Communications 71% $36,874 44% $42,221 41% $41,517 Automotive 0% -
20% 19,020 17% 16,786 High-end computing & storage 7% 3,518 10%
9,271 12% 11,953 Test & measurement 4% 2,280 6% 6,107 6% 6,495
Aviation & aerospace 3% 1,530 2% 1,616 2% 1,813 EMSI &
other 15% 7,410 18% 16,895 22% 21,829
----------------------------------------------------------------------
OTHER FINANCIAL DATA
----------------------------------------------------------------------
Cash provided by operations $4,755 $1,743 $8,442 EBITDA, adjusted
$2,666 $11,339 $12,879 Capital expenditures $1,793 $3,121 $1,553
Depreciation and amortization (% of sales) 8.7% $4,505 6.7% $6,354
5.8% $5,853
----------------------------------------------------------------------
NON-GAAP EARNINGS RECONCILIATIONS
----------------------------------------------------------------------
EPS Net EPS Net EPS Net Loss Income Income (Loss) (Loss)
-------------------------------------------------- GAAP net income
(loss) $(0.09) $(1,710) $0.04 $809 $0.17 $3,514 Adjustments:
Amortization of identifiable intangibles 0.04 739 0.04 854 0.03 674
Legal fees for defense of securities litigation 0.03 550 - - - -
Executive severance 0.01 230 - - - - Restructuring and related
activities - - - - - - Debt restructuring costs - - - - 0.09 1,820
Asia purchase adjustments - - 0.11 2,158 - - Adjustment to
valuation allowance on deferred tax asset 0.00 67 (0.05) (1,083)
(0.10) (2,113) --------------------------------------------------
Non-GAAP net income (loss) $(0.01) $(124) $0.14 $2,738 $0.19 $3,895
--------------------------------------------------
-------------------------------------------------- GAAP net income
(loss) $(1,710) $809 $3,514 Add back items: Interest expense 431
1,987 2,101 Interest income (567) (360) (392) Debt restructuring
costs - - 1,820 Income tax expense (benefit) 7 391 (16)
Amortization 841 1,121 978 Depreciation 3,664 5,233 4,874 Asia
purchase adjustments - 2,158 -
-------------------------------------------------- EBITDA, adjusted
$2,666 $11,339 $12,879
----------------------------------------------------------------------
MERIX CORPORATION RELATED FINANCIAL HIGHLIGHTS (dollars and shares
in thousands, except EPS, unaudited)
----------------------------------------------------------------------
FY2005 FY2006
----------------------------------------------------------------------
SUMMARY OPERATING RESULTS
----------------------------------------------------------------------
Net sales 100.0% $186,994 100.0% $308,982 Cost of sales 87.3%
163,205 82.5% 254,864 Gross margin 12.7% 23,789 17.5% 54,118
Engineering expense 3.6% 6,774 2.2% 6,655 Selling, general &
administrative expense 9.8% 18,278 10.8% 33,353 Amortization of
identifiable intangibles 0.7% 1,374 1.0% 3,106 Severance and
impairment charges 0.0% - 0.4% 1,135 Total operating expense 14.1%
26,426 14.3% 44,249 Operating income (loss) -1.4% (2,637) 3.2%
9,869 Debt restructuring costs 0.0% - -0.6% (1,820) Interest and
other income (expense), net 0.0% 35 -1.9% (5,785) Income (loss)
before taxes and minority interest -1.4% (2,602) 0.7% 2,264 Net
income (loss) -1.4% (2,610) 0.5% 1,432 Effective tax rate 0.0%
23.2% Shares for diluted EPS 19,224 19,715 Diluted income (loss)
per share $(0.14) $0.07
----------------------------------------------------------------------
SALES BY END MARKETS (% of Sales)
----------------------------------------------------------------------
Communications 78% $145,053 52% $159,898 Automotive 0% - 13% 39,764
High-end computing & storage 8% 14,803 9% 29,012 Test &
measurement 4% 8,302 6% 19,371 Aviation & aerospace 0% - 2%
6,888 EMSI & other 10% 18,836 18% 54,049
----------------------------------------------------------------------
OTHER FINANCIAL DATA
----------------------------------------------------------------------
Cash provided by operations $9,781 $16,520 EBITDA, adjusted $12,372
$32,943 Capital expenditures $15,813 $7,261 Depreciation and
amortization (% of sales) 8.2% $15,306 7.0% $21,693
----------------------------------------------------------------------
NON-GAAP EARNINGS RECONCILIATION
----------------------------------------------------------------------
EPS Net EPS Net Income Income ----------------------------------
GAAP net income (loss) $(0.14) $(2,610) $0.07 $1,432 Adjustments:
Amortization of identifiable intangibles 0.07 1,374 0.16 3,105
Legal fees for defense of securities litigation 0.03 550 0.03 575
Executive severance 0.01 230 - - Restructuring and related
activities - - 0.06 1,135 Debt restructuring costs - - 0.09 1,820
Purchase adjustments 0.02 320 0.20 3,885 Adjustment to valuation
allowance on deferred tax asset 0.00 48 (0.20) (3,915)
---------------------------------- Non-GAAP net income (loss)
$(0.00) $(88) $0.41 $8,037 ---------------------------------- GAAP
Net Income (Loss) $(2,610) $1,432 Add back items: Interest expense
1,681 5,513 Interest income (2,013) (1,833) Debt restructuring
costs - 1,820 Income tax expense (benefit) 8 433 Amortization
15,306 3,902 Depreciation - 17,791 Asia purchase adjustments -
3,885 ---------------------------------- EBITDA, adjusted $12,372
$32,943
----------------------------------------------------------------------
*T
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