Merix Corporation (NASDAQ: MERX) today announced consolidated
financial results for the second quarter of fiscal 2009 ended
November 29, 2008.
The Company reported a net loss of $6.1 million or $0.29 per
diluted share on revenue of $76.9 million for the second quarter of
fiscal 2009, which compares to a net loss of $5.0 million or $0.24
per diluted share on revenue of $97.4 million for the second
quarter of fiscal 2008. Included in the second quarter loss is $1.1
million of severance and a write down of assets held for sale
associated with our cost reduction activities. In addition, the
company generated $4.0 million of cash from operations during the
second quarter.
Commenting on the recent second quarter performance, Michael D.
Burger, President and Chief Executive Officer, said, "The global
demand for printed circuit boards in the commercial sectors of our
market has been adversely impacted by the recent financial crisis
that has affected many areas of the global economy. The
restructuring activities that we have taken over the last 18 months
have enabled us to substantially offset the decline in gross margin
despite the 21% reduction in second quarter revenue when compared
to last year."
Looking ahead Mr. Burger commented, "The global economy
continues to remain challenging and difficult to predict. However,
with our major capital investments behind us our focus will be on
the continued aggressive management of our business enabling us to
service our customers, while also making the necessary and
appropriate decisions to remain healthy financially."
On a sequential basis, second quarter 2009 revenue decreased 15%
when compared to the first quarter of fiscal 2009. This decline was
primarily focused in the communications and networking end market
segment. In addition, as previously reported our planned shipments
in support of Asia's Oracle implementation caused us to advance
ship approximately $2.5 million of product to our Asian customers
in the first fiscal quarter adversely impacting revenue in the
second quarter.
Merix' overall gross margin averaged 7.8% of revenue for the
second quarter of fiscal 2009 compared to 9.8% and 11.3% in the
second quarter of fiscal 2008 and first quarter of fiscal 2009,
respectively. North American gross margins declined over 7 points
sequentially to 4.1% of revenue due primarily to lower fixed cost
absorption resulting from decreased production volumes. Asia gross
margins remained stable compared to the first quarter of fiscal
2009 at 11.2%.
Operating expenses totaled $10.3 million in the second quarter
of fiscal 2009 compared to $12.7 million and $10.3 million in the
second quarter of fiscal 2008 and first quarter of fiscal 2009,
respectively.
Conference Call and Webcast Information
Merix will conduct a conference call and live webcast Wednesday,
January 7, 2009 at 2:00 p.m. PST. Management will discuss second
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 PST
on January 7, 2009 and a telephone replay will be available from
4:00 pm PST on January 7, 2009 until 11:59 pm PST on Friday,
January 16, 2009 by calling (320) 365-3844, access code 978810.
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 first quarter ended August 30, 2008.
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
------------------------------- --------------------
November August December November December
29, 30, 1, 29, 1,
2008 2008 2007 2008 2007
--------- --------- --------- --------- ---------
Net sales: $ 76,900 $ 90,627 $ 97,378 $ 167,527 $ 196,808
Cost of sales 70,865 80,353 87,855 151,218 176,242
--------- --------- --------- --------- ---------
Gross profit 6,035 10,274 9,523 16,309 20,566
Gross margin 7.8% 11.3% 9.8% 9.7% 10.4%
Operating expenses:
Engineering 697 563 486 1,260 950
Selling, general
and administrative 7,989 9,702 10,628 17,691 22,231
Amortization of
intangible assets 520 520 645 1,040 1,258
Impairment and
severance charges 1,089 (527) 980 562 1,221
--------- --------- --------- --------- ---------
Total operating
expenses 10,295 10,258 12,739 20,553 25,660
--------- --------- --------- --------- ---------
Operating income
(loss) (4,260) 16 (3,216) (4,244) (5,094)
Other expense, net (1,029) (1,189) (1,045) (2,218) (2,170)
--------- --------- --------- --------- ---------
Loss before income
taxes and minority
interests (5,289) (1,173) (4,261) (6,462) (7,264)
Provision for income
taxes 693 728 546 1,421 956
--------- --------- --------- --------- ---------
Loss before minority
interests (5,982) (1,901) (4,807) (7,883) (8,220)
Minority interests 106 246 202 352 438
--------- --------- --------- --------- ---------
Net loss $ (6,088) $ (2,147) $ (5,009) $ (8,235) $ (8,658)
========= ========= ========= ========= =========
Diluted net loss per
share $ (0.29) $ (0.10) $ (0.24) $ (0.39) $ (0.41)
========= ========= ========= ========= =========
Diluted shares used
in per share
calculations 20,945 20,794 21,024 20,867 20,964
========= ========= ========= ========= =========
MERIX CORPORATION
SUPPLEMENTAL INFORMATION
NET SALES, GROSS PROFIT & GROSS MARGIN BY SEGMENT
(in thousands)
(Unaudited)
Fiscal quarter ended Six months ended
------------------------------- --------------------
November August December November December
29, 30, 1, 29, 1,
2008 2008 2007 2008 2007
--------- --------- --------- --------- ---------
Net sales:
Oregon $ 29,431 $ 37,243 $ 44,566 $ 66,674 $ 91,906
San Jose 6,720 7,674 8,329 14,394 17,165
--------- --------- --------- --------- ---------
North America 36,151 44,917 52,895 81,068 109,071
Asia 40,749 45,710 44,483 86,459 87,737
--------- --------- --------- --------- ---------
Total net
sales $ 76,900 $ 90,627 $ 97,378 $ 167,527 $ 196,808
========= ========= ========= ========= =========
Gross profit:
Oregon $ 768 $ 3,849 $ 4,010 $ 4,617 $ 10,334
San Jose 716 1,315 1,583 2,031 2,850
--------- --------- --------- --------- ---------
North America 1,484 5,164 5,593 6,648 13,184
Asia 4,551 5,110 3,930 9,661 7,382
--------- --------- --------- --------- ---------
Total gross
profit $ 6,035 $ 10,274 $ 9,523 $ 16,309 $ 20,566
========= ========= ========= ========= =========
Gross margin:
Oregon 2.6% 10.3% 9.0% 6.9% 11.2%
San Jose 10.7% 17.1% 19.0% 14.1% 16.6%
--------- --------- --------- --------- ---------
North America 4.1% 11.5% 10.6% 8.2% 12.1%
Asia 11.2% 11.2% 8.8% 11.2% 8.4%
--------- --------- --------- --------- ---------
Total gross
margin 7.8% 11.3% 9.8% 9.7% 10.4%
========= ========= ========= ========= =========
MERIX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
November 29, May 31,
2008 2008
------------ ------------
Assets:
Cash and short-term investments $ 11,483 $ 5,728
Accounts receivable, net 65,682 73,153
Inventories, net 22,409 23,631
Assets held for sale 309 1,477
Deferred income taxes 75 75
Prepaid and other current assets 11,254 12,961
------------ ------------
Total current assets 111,212 117,025
Property, plant and equipment, net 104,725 103,012
Goodwill 31,892 31,794
Intangible assets, net 7,825 8,866
Deferred income taxes 773 885
Assets held for sale 1,146 -
Other assets 5,139 5,859
------------ ------------
Total assets $ 262,712 $ 267,441
============ ============
Liabilities and Shareholders' Equity:
Accounts payable $ 55,476 $ 59,789
Accrued liabilities 16,289 15,783
------------ ------------
Total current liabilities 71,765 75,572
Long-term debt 76,983 70,000
Other long-term liabilities 3,531 3,522
------------ ------------
Total liabilities 152,279 149,094
------------ ------------
Minority interests 3,694 4,573
Shareholders' equity 106,739 113,774
------------ ------------
Total liabilities and shareholders' equity $ 262,712 $ 267,441
============ ============
MERIX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands)
(Unaudited)
Fiscal quarter ended Six months ended
-------------------- --------------------
Nov. 29, Dec. 1, Nov. 29, Dec. 1,
2008 2007 2008 2007
--------- --------- --------- ---------
Cash flows from operating
activities:
Net loss $ (6,088) $ (5,009) $ (8,235) $ (8,658)
Net adjustments to reconcile
loss to net cash provided
by operating activitities:
Depreciation and
amortization 5,668 5,375 11,125 10,996
Other non-cash items 1,168 1,308 1,412 2,669
Changes in working capital 3,208 (4,027) 8,786 (774)
--------- --------- --------- ---------
Net cash provided by
operating activities 3,956 (2,353) 13,088 4,233
Cash flows from investing
activities:
Purchases of property, plant
and equipment (5,423) (6,497) (14,844) (12,070)
Proceeds from disposal of
property, plant and
equipment 44 - 599 23
Net changes in investments - - - 9,025
--------- --------- --------- ---------
Net cash used in
investing activities (5,379) (6,497) (14,245) (3,022)
Cash flows from financing
activities:
Principal payments on
long-term borrowings and
capital lease obligations - (200) - (438)
Net borrowings on revolving
line of credit 6,983 - 6,983 -
Other financing activities, net (15) (888) (71) (1,282)
--------- --------- --------- ---------
Net cash used in
financing activities 6,968 (1,088) 6,912 (1,720)
--------- --------- --------- ---------
Net change in cash and cash
equivalents 5,545 (9,938) 5,755 (509)
Cash and cash equivalents
Beginning of period 5,938 26,604 5,728 17,175
--------- --------- --------- ---------
End of period $ 11,483 $ 16,666 $ 11,483 $ 16,666
========= ========= ========= =========
SUPPLEMENTAL INFORMATION
NET SALES STATISTICS AND SHARE BASED COMPENSATION
(in thousands)
(Unaudited)
Three months ended
----------------------------------------------
November 29, August 30, December 1,
2008 2008 2007
-------------- -------------- --------------
Net Sales by End Markets:
Communications &
Networking $ 29,664 43% $ 38,776 43% $ 39,859 41%
Automotive 17,449 21% 19,413 21% 20,855 21%
Computing & Peripherals 5,984 7% 6,585 7% 8,375 9%
Test, Industrial and
Medical 9,366 12% 10,419 11% 10,783 11%
Defense & Aerospace 7,299 8% 7,223 8% 6,528 7%
Other 7,138 9% 8,211 9% 10,978 11%
--------- --- --------- --- --------- ---
$ 76,900 100% $ 90,627 100% $ 97,378 100%
========= === ========= === ========= ===
Net Sales by Type:
Quick-Turn & Premium $ 13,158 17% $ 17,979 20% $ 23,259 24%
Full Lead Time 63,742 83% 72,648 80% 74,119 76%
--------- --- --------- --- --------- ---
$ 76,900 100% $ 90,627 100% $ 97,378 100%
========= === ========= === ========= ===
Top 5 Customers (as % of
net sales) 36% 40% 31%
========= ========= =========
Share-based Compensation: $ 407 $ 566 $ 538
========= ========= =========
Six months ended
------------------------------
November 29, December 1,
2008 2007
-------------- --------------
Net Sales by End Markets:
Communications &
Networking $ 68,440 41% $ 82,507 42%
Automotive 36,862 22% 41,063 21%
Computing & Peripherals 12,569 8% 16,384 8%
Test, Industrial and
Medical 19,785 12% 22,269 11%
Defense & Aerospace 14,522 9% 12,293 6%
Other 15,349 9% 22,292 11%
--------- --- --------- ---
$ 167,527 100% $ 196,808 100%
========= === ========= ===
Net Sales by Type:
Quick-Turn & Premium $ 31,137 19% $ 47,389 24%
Full Lead Time 136,390 81% 149,419 76%
--------- --- --------- ---
$ 167,527 100% $ 196,808 100%
========= === ========= ===
Top 5 Customers (as % of
net sales) 38% 32%
========= =========
Share-based Compensation: $ 973 $ 1,298
========= =========
Merix Investor Relations Contact: Allen Muhich Vice President -
Finance & Corporate Controller 503.716.3700
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