MFLEX Reports Fiscal 2013 Second Quarter Financial Results PR Newswire IRVINE, Calif., May 2, 2013 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: email@example.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 - (1,171) - (1,736) restructuring Total operating 10,789 13,047 25,031 26,576 expenses 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), 170 1,333 155 1,804 net (Loss) income before (26,204) 14,641 (15,799) 30,883 income taxes Benefit from (provision for) 2,325 (2,537) 268 (5,235) income taxes 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' $589,158 $ 696,410 equity 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 14,740 13,954 29,158 26,663 amortization Provision for doubtful accounts and (1,247) 38 685 1,837 allowances Deferred taxes (56) (71) (106) (74) Stock-based 1,241 1,503 2,548 2,888 compensation expense Income tax benefit related to stock option (29) (53) (29) (70) exercises Restructuring asset - (1,171) - (1,736) recoveries (Loss) gain on (130) (8) (124) 5 disposal of equipment Changes in operating 56,918 38,642 59,414 15,517 assets and liabilities Net cash provided by operating 47,558 64,938 76,015 70,678 activities Cash flows from investing activities Purchases of property (10,879) (13,604) (26,792) (33,950) and equipment Proceeds from sale of equipment and assets 136 7,833 136 8,532 held for sale Net cash used in investing (10,743) (5,771) (26,656) (25,418) activities Cash flows from financing activities Income tax benefit related to stock option 29 53 29 70 exercises Tax withholdings for net share settlement of (66) (239) (803) (1,039) equity awards Proceeds from exercise 568 114 597 149 of stock options Repurchase of common (212) (984) (1,444) (8,844) stock Net cash used in financing 319 (1,056) (1,621) (9,664) activities Effect of exchange rate 55 (879) (219) (446) changes on cash Net 37,189 57,232 47,519 35,150 increase in cash Cash and cash equivalents at beginning 92,652 75,808 82,322 97,890 of period Cash and cash equivalents at end of $ 129,841 $ 133,040 $ 129,841 $ 133,040 period 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 (406) (30) (826) (249) adjustments 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 0.03 0.04 0.07 0.08 diluted earnings per share Effect of impairment and restructuring, net of tax on - (0.03) - (0.04) diluted earnings per share Non-GAAP diluted earnings per $ (0.97) $ 0.51 $ (0.58) $ 1.10 share Weighted-average diluted shares used in calculating non-GAAP 23,799 24,104 23,797 24,113 diluted earnings per share 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. Website: http://www.mflex.com
MFLEX Reports Fiscal 2013 Second Quarter Financial Results
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