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Merix Corporation (NASDAQ:MERX) today announced consolidated financial results for the third quarter of fiscal 2007 ended February 24, 2007.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
The Company reported net income from continuing operations of $1.8 million or $0.09 per share on revenue of $100.3 million for the third quarter of fiscal 2007, which compares to net income of $0.7 million or $0.04 per share on revenue of $92.8 million for the 2006 fiscal third quarter. During the first three quarters of fiscal 2007 the Company reported net income from continuing operations of $8.3 million or $0.40 per share on revenues of $306.9 million, which compares to a net loss of $2.2 million or $0.11 per share during the same fiscal 2006 period. Net income including discontinued operations was $2.1 million or the third quarter and $7.5 million for the first three quarters of fiscal 2007. As highlighted above, third quarter 2007 revenues increased 8% over the same quarter in fiscal 2006, but declined 3% from the second quarter of this fiscal year. The sequential reduction in quarterly revenue was primarily a result of the cyclical slowdown currently being experienced in the North American markets. Quick turn and premium services revenue represented 25% of Company's total revenue mix in the third quarter of fiscal 2007 compared to 27% in the second quarter of fiscal 2007. The lower quick turn and premium services revenue was primarily caused by the short-term prioritization of full lead time customer shipments required to reduce the Company's backlog position to more normal levels.
Gross margins averaged 17.3% of revenues for the third quarter of fiscal 2007, which approximated the margins reported in both the third quarter of fiscal 2006 and the second quarter of fiscal 2007. Sequentially, North American gross margins declined by 3.1 percentage points from the second quarter of fiscal 2007 to the third quarter of fiscal 2007 principally because of the reduction in higher margin quick turn and premium services revenue mentioned above. As expected however, gross margins in Asia improved by 3.8 percentage points, which was primarily caused by higher average prices as well as continued growth of new higher margin business for our Asian factories.
Operating expenses totaled 13.9% of revenues for the third quarter of fiscal 2007 compared to 14.2% in the 2006 third quarter and 13.3% in the second quarter of fiscal 2007.
Included in the third quarter of fiscal 2007 operating expenses was $1.0 million or 1.0% of revenues related to severance costs and executive search fees primarily resulting from the January 2007 resignation of Merix' Chief Executive Officer. Excluding these one-time costs, operating expenses would have been 12.9% of revenues for the third quarter of fiscal 2007.
"Our third quarter's results are in line with the expectations set earlier in the quarter," said William C. McCormick, Chairman and Interim Chief Executive Officer. "We improved the performance in our Asian operation, which continues to rebound from the unprecedented copper laminate cost increases. However, we must continue to execute on our plan of improving the mix of business for Merix Asia to be profitable and value creating." McCormick continued, "We are also pleased to announce that on April 1, 2007 we completed the previously disclosed sale of the two non-strategic single-sided facilities in <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />China. The completion of this transaction enables the Merix management team to focus its full attention on continuing to improve the Asian operations."
Mr. McCormick also commented on the Company's recent Chief Executive Officer search, "The Company's Board of Directors is aggressively pursuing the search for a new CEO. The Board is pleased with progress of the search process as well as the quality of candidates that have surfaced. Although it's difficult to predict, we are optimistic that we could have our new CEO on board by the first quarter of fiscal 2008."
The Company completed the third fiscal quarter of 2007 with $61.2 million of backlog to be shipped during the fourth fiscal quarter. We currently estimate revenues for the fourth quarter of fiscal 2007 to range between $93 million and $97 million and net income from continuing operations to approximate breakeven. Net income includes an estimated $0.5 million for stock option expense.
Commenting on the outlook, McCormick stated, "Many of our North American markets have softened since the end of calendar 2006. We believe this softness is a normal cyclical slowdown that is periodically experienced in our industry. However, we continue to expect sequential improvements in Asian operations to somewhat offset the North American market slowdown."
Conference Call and Webcast Information
Merix will conduct a conference call and live webcast today Monday, April 2, 2007 at 1:30 pm PT. Management will discuss third quarter fiscal 2007 results and its business outlook for the fourth quarter at that time.
To access the webcast, log on to www.merix.com. A replay of the webcast will be available beginning at 4:00 pm PT on Monday, April 2, 2007. A phone replay will be available until approximately 6:00 pm PT on Monday, April 9, 2007 by calling (719) 457-0820, access code 8114159.
Merix is a leading manufacturer of technologically advanced, multilayer, rigid printed circuit boards for use in sophisticated electronic equipment. Merix provides highperformance materials, quick-turn prototype, pre-production and volume board production to its customers. Principal markets served by Merix include communications and networking, computing and peripherals, 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