MFLEX Reports Fiscal 2013 Second Quarter Financial Results

02 May, 2013, 16:30 ET from Multi-Fineline Electronix, Inc.

IRVINE, Calif., May 2, 2013 /PRNewswire/ -- Multi-Fineline Electronix, Inc. (NASDAQ: MFLX), a leading global provider of high-quality, technologically advanced flexible printed circuit and value-added component assembly solutions to the electronics industry, today reported financial results for its fiscal second quarter ended March 31, 2013.  Net sales in the second quarter of fiscal 2013 were $173.7 million, down 16 percent from net sales of $208.0 million in the same quarter last year.  This decrease was primarily due to lower sales to key customers.

Non-GAAP gross margin during the second quarter of fiscal 2013, which excludes the impact of an inventory write-down, was (2.7) percent.  This compares to 12.5 percent for the same period in the prior year. The year-over-year decline was primarily driven by lower overhead absorption due to reduced production levels.  In anticipation of softer demand during the quarter, the Company lowered production levels in order to reduce inventory.  Inventory declined by $50 million during the second quarter.  The Company recorded a $10.9 million inventory write-down as a result of unusable components, as well as a small portion that was written-down as a result of uncertainty in near-term demand forecasts. Including the inventory write-down, fiscal 2013 second quarter GAAP gross margin was (8.9) percent.

Net loss for the second quarter of fiscal 2013 was $23.9 million, or $1.00 per diluted share, compared to net income of $12.1 million, or $0.50 per diluted share, for the same period in the prior year.  

Net cash provided by operating activities for the second quarter of fiscal 2013 was $47.6 million.  At March 31, 2013, the Company had cash and cash equivalents of $129.8 million, or $5.46 per diluted share, and remained debt free.

Non-GAAP Results A reconciliation of GAAP gross margin, net income and earnings per share to non-GAAP gross margin, net income and earnings per share is provided in the table at the end of this press release.  

Share Repurchase Program MFLEX also announced today that it is in the process of entering into a 10b5-1 plan providing for the repurchase of up to approximately 535,000 shares in the aggregate of the Company's common stock under its current repurchase authorization. The timing, price, volume and terms of the repurchases will be based on market conditions, relevant securities laws and other factors.

Outlook For the third quarter of fiscal 2013, the Company expects net sales to be between $155 and $185 million and gross margin to be approximately breakeven based on production build plans, projected sales volume and anticipated product mix. 

Reza Meshgin, Chief Executive Officer of MFLEX, commented "Due to continued soft market conditions, we plan to continue to focus on reducing inventory levels during the third quarter.  Therefore, we plan to again minimize production which we expect to continue to pressure our gross margin during the quarter.  We believe these conditions are temporary and continue to expect a rebound in revenue and profitability in the fourth quarter and further into fiscal 2014, when we anticipate an increase in demand from both long-standing and newer customers.  During the second quarter, newer customers comprised approximately 8 percent of sales and we expect this contribution to double in the third quarter.  We are optimistic that this new customer momentum will continue, and that a broader customer and product base will alleviate the current challenges associated with seasonality and product cycles as we enter into fiscal 2014."   

Conference Call MFLEX will host a conference call at 5:30 p.m. Eastern time (2:30 p.m. Pacific time) today to review its fiscal 2013 second quarter financial results.  The dial-in number for the call in North America is 1-888-549-7880 and 1-480-629-9772 for international callers. The call also will be webcast live on the Internet and can be accessed by logging onto www.mflex.com.

The webcast will be archived on the Company's website for at least 60 days following the call. An audio replay of the conference call will be available for seven days beginning at 8:30 p.m. Eastern time (5:30 p.m. Pacific time) today.  The audio replay dial-in number for North America is 1-800-406-7325 and 1-303-590-3030 for international callers.  The replay passcode is 4615200.

About MFLEX MFLEX (www.mflex.com) is a global provider of high-quality, technologically advanced flexible printed circuit and value-added component assembly solutions to the electronics industry. The Company is one of a limited number of manufacturers that provides a seamless, integrated end-to-end flexible printed circuit solution for customers, ranging from design and application engineering, prototyping and high-volume manufacturing to turnkey component assembly and testing. The Company targets its solutions within the electronics market and, in particular, focuses on applications where flexible printed circuits are the enabling technology in achieving a desired size, shape, weight or functionality of an electronic device. Current applications for the Company's products include smartphones, tablets, computer/data storage, portable bar code scanners and other consumer electronic devices. MFLEX's common stock is quoted on the Nasdaq Global Select Market under the symbol MFLX.

Forward-Looking Statements

Certain statements in this news release are forward-looking statements that involve a number of risks and uncertainties. These forward-looking statements include, but are not limited to, statements and predictions regarding: revenues; sales; net income; profitability; revenue growth; cash flow; gross margins; overhead absorption; product cycles and the ramping of new programs; labor costs; new customer opportunities; customer relationships; customer and product mix; inventory levels; production build plans; write offs; demand forecasts; seasonality; customer and market diversification strategies; capacity, utilization and expansion of the Company's facilities; headcount levels; yields; and labor efficiency.  Additional forward-looking statements include, but are not limited to, statements pertaining to other financial items, plans, strategies or objectives of management for future operations, the Company's future operations and financial condition or prospects, and any other statement that is not historical fact, including any statement which is preceded by the words "forecast," "guidance," "preliminary," "scheduled," "assume," "can," "will," "plan," "should," "expect," "estimate," "aim," "intend," "look," "see," "project," "foresee," "target," "anticipate," "may," "believe," or similar words. Actual events or results may differ materially from those stated or implied by the Company's forward-looking statements as a result of a variety of factors including the effect of the economy and seasonality on the demand for electronic devices; the Company's success with new and current customers, those customers' success in the marketplace and usage of flex in their products; demand for the Company's products; product mix; the Company's ability to develop and deliver new technologies; the Company's ability to diversify and expand its customer base and markets; the Company's effectiveness in managing manufacturing processes, inventory levels, costs and yields; the ramping and launch of new programs; currency fluctuations; pricing pressure; the Company's ability to manage quality assurance and workforce issues; the degree to which the Company is able to utilize available manufacturing capacity, enter into new markets and execute its strategic plans; electricity, material and component shortages; the impact of natural disasters, competition and technological advances; the outcome of tax audits; labor issues in the jurisdictions in which the Company operates; and other risks detailed from time to time in the Company's SEC reports, including its Quarterly Report on Form 10-Q for the quarter ended December 31, 2012 and its Quarterly Report on Form 10-Q to be filed for the quarter ended March 31, 2013.  These forward-looking statements represent management's judgment as of the date of this news release. The Company disclaims any intent or obligation to update these forward-looking statements.  

 

 

Contact:

Stacy Feit

Investor Relations

Tel: 213-486-6549

Email: investor_relations@mflex.com

 

(SUMMARY FINANCIAL INFORMATION FOLLOWS)

 

 

Multi-Fineline Electronix, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

Six Months Ended

March 31,

March 31,

2013

2012

2013

2012

Net sales

$173,674

$207,963

$463,324

$447,306

Cost of sales

189,207

181,880

454,154

392,062

   Gross (loss) profit

(15,533)

26,083

9,170

55,244

Operating expenses:

   Research and development

1,782

2,231

3,815

4,310

   Sales and marketing

4,712

6,503

11,249

12,890

   General and administrative

4,295

5,484

9,967

11,112

   Impairment and restructuring

-

(1,171)

-

(1,736)

      Total operating expenses

10,789

13,047

25,031

26,576

Operating (loss) income

(26,322)

13,036

(15,861)

28,668

Other income (expense), net:

   Interest income

86

353

156

646

   Interest expense

(138)

(81)

(249)

(235)

   Other income (expense), net

170

1,333

155

1,804

      (Loss) income before income taxes

(26,204)

14,641

(15,799)

30,883

Benefit from (provision for) income taxes

2,325

(2,537)

268

(5,235)

      Net (loss) income

$ (23,879)

$  12,104

$ (15,531)

$  25,648

Net (loss) income per share:

   Basic

$    (1.00)

$     0.51

$    (0.65)

$     1.08

   Diluted

$    (1.00)

$     0.50

$    (0.65)

$     1.06

Shares used in computing net (loss) income per share:

   Basic

23,799

23,870

23,797

23,809

   Diluted

23,799

24,104

23,797

24,113

 

 

Multi-Fineline Electronix, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

March 31,

September 30,

2013

2012

Cash and cash equivalents

$129,841

$        82,322

Accounts receivable, net 

101,573

165,408

Inventories

55,105

124,770

Other current assets

17,010

19,217

          Total current assets

303,529

391,717

Property, plant and equipment, net

255,900

274,886

Other assets 

29,729

29,807

          Total assets

$589,158

$      696,410

Accounts payable

$119,081

$      199,737

Other current liabilities

20,664

36,111

          Total current liabilities

139,745

235,848

Other liabilities

19,153

18,573

Stockholders' equity

430,260

441,989

          Total liabilities and stockholders' equity

$589,158

$      696,410

 

 

Multi-Fineline Electronix, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 Three Months Ended 

 Six Months Ended 

 March 31, 

 March 31, 

2013

2012

2013

2012

Cash flows from operating activities

Net (loss) income

$   (23,879)

$   12,104

$   (15,531)

$   25,648

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

     Depreciation and amortization

14,740

13,954

29,158

26,663

     Provision for doubtful accounts and allowances

(1,247)

38

685

1,837

     Deferred taxes

(56)

(71)

(106)

(74)

     Stock-based compensation expense

1,241

1,503

2,548

2,888

     Income tax benefit related to stock option exercises

(29)

(53)

(29)

(70)

     Restructuring asset recoveries

-

(1,171)

-

(1,736)

     (Loss) gain on disposal of equipment

(130)

(8)

(124)

5

Changes in operating assets and liabilities

56,918

38,642

59,414

15,517

             Net cash provided by operating activities

47,558

64,938

76,015

70,678

Cash flows from investing activities

Purchases of property and equipment

(10,879)

(13,604)

(26,792)

(33,950)

Proceeds from sale of equipment and assets held for sale

136

7,833

136

8,532

             Net cash used in investing activities

(10,743)

(5,771)

(26,656)

(25,418)

Cash flows from financing activities

Income tax benefit related to stock option exercises

29

53

29

70

Tax withholdings for net share settlement of equity awards

(66)

(239)

(803)

(1,039)

Proceeds from exercise of stock options 

568

114

597

149

Repurchase of common stock

(212)

(984)

(1,444)

(8,844)

             Net cash used in financing activities

319

(1,056)

(1,621)

(9,664)

Effect of exchange rate changes on cash

55

(879)

(219)

(446)

             Net increase in cash 

37,189

57,232

47,519

35,150

Cash and cash equivalents at beginning of period

92,652

75,808

82,322

97,890

Cash and cash equivalents at end of period

$  129,841

$ 133,040

$  129,841

$ 133,040

 

Multi-Fineline Electronix, Inc.

Selected Non-GAAP Financial Measures and Schedule Reconciling

Selected Non-GAAP Financial Measures to Comparable GAAP Financial Measures

(unaudited)

Three Months Ended

March 31, 2013

GAAP gross margin percentage

(8.9)%

Effect of inventory write-down

6.2%

Non-GAAP gross margin percentage

(2.7)%

 

Three Months Ended

Six Months Ended

March 31,

March 31,

2013

2012

2013

2012

GAAP net (loss) income

$(23,879)

$12,104

$(15,531)

$25,648

Stock-based compensation

1,241

1,503

2,548

2,888

Impairment and restructuring

-

(1,171)

-

(1,736)

Income tax effect of non-GAAP adjustments

(406)

(30)

(826)

(249)

Non-GAAP net (loss) income

$(23,044)

$12,406

$(13,809)

$26,551

GAAP diluted earnings per share

$    (1.00)

$    0.50

$    (0.65)

$    1.06

Effect of stock-based compensation, net of tax on diluted earnings per share

0.03

0.04

0.07

0.08

Effect of impairment and restructuring, net of tax on diluted earnings per share

-

(0.03)

-

(0.04)

Non-GAAP diluted earnings per share

$    (0.97)

$    0.51

$    (0.58)

$    1.10

Weighted-average diluted shares used in calculating non-GAAP diluted earnings per share

23,799

24,104

23,797

24,113

Use of Non-GAAP Financial Information

To supplement the condensed consolidated financial results prepared in accordance with Generally Accepted Accounting Principles ("GAAP"), the Company uses non-GAAP financial measures (non-GAAP gross margin, non-GAAP net income and non-GAAP diluted earnings per share) that exclude certain charges and gains. Management excludes these items because it believes that the non-GAAP measures enhance an investor's overall understanding of the Company's financial performance and future prospects by being more reflective of the Company's recurring operational activities and to be more comparable with the results of the Company over various periods. Management uses non-GAAP financial measures internally for strategic decision making, forecasting future results and evaluating current performance. By disclosing non-GAAP financial measures, management intends to provide investors with a more meaningful, consistent comparison of the Company's core operating results and trends for the periods presented. Non-GAAP financial measures are not prepared in accordance with GAAP; therefore, the information is not necessarily comparable to other companies' financial information and should be considered as a supplement to, not a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.

Non-GAAP gross margin excludes the charge to write-down inventory.  The items excluded from GAAP net income and diluted earnings per share in calculating these non-GAAP financial measures are as follows: (a) stock-based compensation expense; and (b) impairment and restructuring activities, including asset impairments, one-time termination benefit, other restructuring-related costs and gains on sale of previously impaired assets as part of restructuring activities. 

Multi-Fineline Electronix, Inc.

Product Mix

 Three Months Ended 

 March 31, 

2013

2012

Smartphones

65%

71%

Tablets

28%

26%

Consumer Electronics

5%

0%

Multi-Fineline Electronix, Inc.

Key Customer Revenue Contribution

 Three Months Ended 

 March 31, 

2013

2012

"OEM C"

77%

75%

"OEM D"

13%

13%

 

For competitive and customer confidentiality reasons, the Company does not disclose its customers by name.

SOURCE Multi-Fineline Electronix, Inc.



RELATED LINKS

http://www.mflex.com