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Merix Corporation: Merix Corporation Announces Fourth Quarter Fiscal 2009 Results

^{Published on 2009-07-13 13:29:28, Last Modified on 2009-07-13 13:29:39 - Market Wire}
 

BEAVERTON, OR--(Marketwire - July 13, 2009) - 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.