MFLEX Returns To Profitability - Reports Fiscal 2014 Fourth Quarter Financial Results

IRVINE, Calif., Nov. 6, 2014 /PRNewswire/ -- Multi-Fineline Electronix, Inc. MFLX, a leading global provider of high-quality, technologically advanced flexible printed circuits and assemblies, today reported financial results for its fiscal fourth quarter ended September 30, 2014.  The Company returned to profitability with net income for the fourth quarter of fiscal 2014 of $5.9 million, or $0.24 per diluted share, compared to a net loss of ($18.5) million, or ($0.77) per share, for the same period in the prior year. 

Reza Meshgin, Chief Executive Officer of MFLEX, commented, "We had a strong fiscal fourth quarter with net sales results at the high end of our guidance range, gross margin exceeding our guidance range and a return to profitability, an important milestone for the Company.  Our net sales increased 32 percent sequentially, driven by new programs that ramped across our customer base.  We posted strong gross margin results, up 15.6 percentage points sequentially, reflecting the benefits from our recently completed restructuring, strong operational execution, as well as favorable product mix during the quarter.  This drove the significant rebound in our bottom line performance."

Mr. Meshgin continued, "We completed our restructuring initiatives and generated $56 million in annual cost savings, exceeding our initial expectations, of which approximately 90 percent reduces cost of sales and 10 percent lowers our operating expenses.  Our reconfigured manufacturing operations are performing well and as demonstrated in our fiscal fourth quarter results, we are now better positioned to compete more effectively and efficiently in the flexible printed circuit board market."

Net sales in the fourth quarter of fiscal 2014 were $172.9 million, down 8 percent from net sales of $188.3 million in the same quarter last year, primarily due to lower net sales to a key customer, partially offset by a significant increase in sales to the Company's newer customer group.  Net sales to the newer customers in the quarter increased $36.2 million year-over-year to approximately $58.7 million.  These newer customers represented approximately 34 percent of total net sales in the fourth quarter of fiscal 2014, with one of these customers accounting for approximately 16 percent of net sales, supporting a more diversified customer base.  The Company's largest customer accounted for 60 percent of net sales during the fourth quarter of fiscal 2014, compared to 73 percent during the fourth quarter of the prior fiscal year.

Gross margin during the fourth quarter of fiscal 2014 was 10.1 percent, compared to a loss of (3.2) percent for the same period in the prior year.  The significant increase was primarily driven by cost reductions resulting from the recently completed restructuring plan, favorable product mix and strong manufacturing efficiency and yields. 

Non-GAAP net income for the fourth quarter of fiscal 2014 was $6.9 million, or $0.28 per diluted share, compared to a non-GAAP net loss of ($18.1) million, or ($0.75) per share, in the same period a year ago.  Non-GAAP net income excludes the impact of stock-based compensation expense, impairment and restructuring charges and valuation allowances related to the restructuring.  A reconciliation of GAAP net income (loss) and net income (loss) per share to non-GAAP net income (loss) and net income (loss) per share is provided in the table at the end of this press release.  

The Company generated $5.8 million in cash flows from operating activities during the fourth quarter of fiscal 2014.  MFLEX maintains a strong balance sheet with no debt and cash and cash equivalents of $98.7 million at September 30, 2014.           

Outlook

As previously announced, the Company will be changing its year-end to December 31^st.  For the fourth quarter of calendar 2014, the Company expects net sales to be between $180 and $210 million.  Gross margin is expected to range between 6 and 8 percent.

Commenting on the Company's business outlook, Mr. Meshgin noted, "We expect another sequential increase in net sales during the December quarter driven by anticipated demand across our customer base.  Our gross margin expectations reflect the benefits of our recently completed restructuring plan, as well as a more normalized product mix compared to the September quarter.  As a result of our improved cost structure, we expect to generate another quarter of net income. Looking further ahead, we intend to focus on continued customer and product diversification while maintaining solid relationships with our current customers.  We expect this, in conjunction with continued cost management, to lessen the variability in our quarterly results and produce solid profitability in the 2015 calendar year." 

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 2014 fourth quarter and full-year financial results.  The dial-in number for the call in North America is 1-888-505-4369 and 1-719-325-2308 for international callers.  The conference ID is 8968817.  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 1-888-203-1112 and 1-719-457-0820 for international callers.  The replay passcode is 8968817.

About MFLEX

MFLEX (www.mflex.com) is a global provider of high-quality, technologically advanced flexible printed circuits and assemblies 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, personal computers, wearables 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: net sales; net income and losses; profitability; gross margins; product mix; impairment and restructuring charges, including the cash component thereof and the effect of asset disposals; asset write-downs; manufacturing capacity, efficiencies and yields; cost reductions and our cost structure; tax and operating expenses; cash flow; overhead absorption; forecasts; sales growth and growth objectives; the benefits of our restructuring; demand for our end customers' programs; diversification of our customer base, including the effects on quarterly revenue swings; new customer opportunities and momentum with our newer customers; customer relationships; our competitive position;  inventory levels; production build plans, including the ramping and timing of new programs; demand and program allocation from our customers; revenue capacity, gross margin targets and profitability breakeven points; use of our credit lines; and balance sheet projections.  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," "should," "preliminary," "scheduled," "assume," "can," "will," "plan," "could," "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; our success with new and current customers, those customers' success in the marketplace and usage of flex in their products; our market share in our customers' programs; product mix;  our ability to diversify and expand our customer base and markets; our effectiveness in managing manufacturing processes, inventory levels, costs, quality assurance and yields; the ramping and launch of new programs; currency fluctuations; pricing pressure; the outcome of our restructuring plans and the sustainability of the benefits thereof; Company workforce issues; our ability to remain cost competitive; the degree to which we are able to utilize available manufacturing capacity, enter into new markets and execute our strategic plans; asset write-downs and impairment charges; utility, 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 we operate; and other risks detailed from time to time in our SEC reports, including our Quarterly Reports on Form 10-Q for the quarter ended June 30, 2014 and our Annual Report on Form 10-K to be filed for the year ending September 30, 2014.  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.  

 (SUMMARY FINANCIAL INFORMATION FOLLOWS)

 

 

 

 

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 net income (loss) and non-GAAP diluted net income (loss) 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.

The items excluded from GAAP net income (loss) and diluted net income (loss) per share in calculating these non-GAAP financial measures are as follows: (a) stock-based compensation expense; (b) impairment and restructuring activities; and (c) valuation allowance related to restructuring activities. 

For the three months and twelve months ended September 30, 2014 and 2013, the Company had the following product mix:

 

 

SOURCE Multi-Fineline Electronix, Inc.