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Merix Corporation (NASDAQ:MERX) today announced consolidated financial results for the second fiscal quarter ended November 25, 2006. Both revenues and earnings increased significantly from the prior year quarter. Revenues for the second quarter of fiscal 2007 increased 70% to $103.7 million compared to $61.0 million for the second quarter of fiscal 2006. This increase was due primarily to the inclusion of a full quarter of sales for Merix Asia in the second quarter of fiscal 2007 while approximately three weeks of results related to Merix Asia were included in the second quarter of the prior fiscal year. In addition, the Company experienced significant growth in its North American revenues and operating profits as compared to the prior year quarter. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Revenues and operating results for fiscal 2006 and first quarter fiscal 2007 have been adjusted to reflect the income statement reclassification of two single-sided board facilities that commencing in the second quarter are now classified as discontinued operations. As previously announced, these discontinued operations relate to the pending disposition of two non-strategic printed circuit board factories located in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Southern China. These businesses manufacture lower-technology single-sided printed circuit boards, which are inconsistent with Merix' higher technology multi-layer business model. Projected revenues from the single sided operations for the Company's fiscal 2007 are approximately $11 million to $12 million with operating results approximately break-even. The Company reported a charge of $1.3 million during the second quarter related to the pending disposal of these assets.
Consolidated income from continuing operations in the second quarter of fiscal 2007 was $3.1 million or $0.15 per fully diluted share compared to a consolidated net loss from continuing operations of $2.4 million or $0.12 per share in the second quarter of fiscal 2006. Including discontinued operations, consolidated net income totaled $1.8 million or $0.08 per share for the second quarter of fiscal 2007, which includes the $1.3 million charge related to the disposal of the single-sided businesses.
During the first half of fiscal 2007, income from continuing operations totaled $6.6 million or $0.31 per fully diluted share compared to a consolidated net loss from continuing operations of $2.9 million or $0.15 per share in the first half of fiscal 2006. Including discontinued operations, consolidated net income totaled of $5.4 million or $0.26 per share for the first six months of fiscal 2007.
"We are pleased that our second quarter results are in line with the expectations we set earlier in the quarter," said Mark R. Hollinger, Chairman and Chief Executive Officer. "I am especially pleased with the performance of our North American business that continued to report solid revenues and gross margins. As anticipated, Merix Asia's profitability declined during the second quarter, which was primarily due to the full quarter's impact of copper laminate cost increases that began to be realized in the first quarter of this fiscal year. We believe that the second quarter was the trough quarter for this business segment as the cost of copper laminate appears to have stabilized and we are now beginning to recoup a portion of these cost increases through recent pricing actions. Cash flows during the quarter were good and we continued to strengthen our balance sheet with modest increases in our cash and investment balances and reductions in debt."
Hollinger continued, "We are also pleased to announce that during the quarter we successfully finalized two significant matters outstanding from the acquisition of Merix Asia. Specifically, we have concluded negotiations for a reduction in the final purchase price of Merix Asia based on the working capital change mechanism in the acquisition agreement. Secondly, we completed the negotiations for the disposition of the non-strategic single-sided business, with the close pending final approval by Chinese authorities. With both of these matters behind us, our management team can focus its full attention on solidifying and growing our operations in the region."
The Company completed the second fiscal quarter of 2007 with $72.5 million of backlog. We currently estimate revenues for the third quarter of fiscal 2007 to range between $100 million and $104 million with consolidated net income from continuing operations of between $1.0 million and $3.0 million or between $0.05 and $0.15 per fully diluted share. Consolidated net income from continuing operations includes an estimated $0.5 million for stock option expense.
Commenting on the outlook, Hollinger stated, "December's order demand is traditionally difficult to assess given the holiday period. However, we continue to see good demand in most of our North American markets and also anticipate that our Asian business will realize additional benefit from the price increases recently enacted to recover increases in the cost of copper laminate. Our focus over the next quarter will be to continue to grow the pace of synergy business between North America and Asia and enhance the Asian product mix. We believe these measures will allow us to grow and improve margins in this region."
Merix is a leading manufacturer of technologically advanced, multilayer, rigid printed circuit boards for use in sophisticated electronic equipment. Merix provides quick-turn prototype, pre-production and volume board production to its customers. Principal markets served by Merix include data communications and wireless telecommunications, automotive, high-end computing, and test and measurement end markets in the electronics industry. Additional corporate information is available on the internet at www.merix.com .