Multi-Fineline Electronix, Inc. (MFLX)

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Multi-Fineline Electronics Inc.

F4Q08 Earnings Call

November 3, 2008 8:30 am ET


Reza Meshgin – President, CEO

Thomas Ligouri - CFO


Richard Kugele – Needham & Company

Brian Jones – RBC Capital Markets

Jiwon Lee – Sidoti & Co.



Welcome to the Multi-Fineline Electronics Inc. 2008 fourth quarter conference call. (Operator Instructions) I would now like to turn the conference over to Reza Meshgin, President and CEO.

Reza Meshgin

Welcome to MFLEX's 2008 fourth quarter conference call. Today I will discuss our operational highlights and business outlook and Tom Ligouri; our CFO will discuss our financial results for the fourth quarter of fiscal 2008. Bill Harding, our Chairman, Tom and I will be available to answer your questions at the conclusion of our presentation. [Lasa Glashin] from the financial relations board will now review our forward-looking statements before we begin our discussion.

[Lasa Glashin]

I'd like to remind you all that certain statements made in this conference call 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, earnings, operating expenses, capital expenditures, costing classifications, cash flow, tax rates and the benefits expected from the company's reorganization, restructuring and cost reduction efforts, the value of option rate securities, DSO, DIO, gross profits including factors which may affect gross profit and the company's targeted range of gross margin, yield, the company's diversification efforts, expected sales to the company's customers and demand for their products, market opportunities and competitive advantages, brands and the utilization of Flex and Flex assemblies, program and product mix, life cycle of the company's customers' programs, the cost and benefits of new programs, the company's manufacturing facilities, capabilities, capacity and the expansion, timing, costs and benefits thereof, the company's ability to ramp production, uses of the company's cash, facilities on liquidity, the effect of the economy and customer concentration on the company's businesses.

Additional forward-looking statements include but are not limited to statements pertaining to other financial items, plans, strategies or objectives of management's future operations, the company's operations and financial conditions or prospects and any other statement that is not historical fact including any statements preceded by the words assume, can, will, plan, expect, estimate, aim, intend, project, foresee, target, anticipate, may, believe or similar words.

For all of the foregoing forward-looking statements the company claims the protection of the Private Securities Litigation Reform Act of 1995. Actual events or results may differ materially from the company's expectations. Important factors that could cause actual results to differ materially from those stated or implied by the company's forward-looking statements include the risks detailed from time to time in the company's SEC reports and this morning's new release.

Forward-looking statements represent the company's judgment as of the date of the call. The company disclaims any intent or obligation to update these forward-looking statements. With that, I'll turn the call back over to Reza.

Reza Meshgin

MFLEX wrapped up a record breaking fiscal 2008 with very strong fourth quarter results that exceeded our expectations for the most of the key matrixes. During the fourth quarter, we generated net sales of $213.1 million which were the highest quarterly sales in our company's history. Despite three non-recurring items that Tom will discuss in more detail in his remarks, we recorded net income of $7.6 million or $0.30 per diluted share, an increase of 150% over $0.12 per diluted share in the fourth quarter of fiscal 2007.

Fourth quarter cash flow from operating activities exceeded $20 million or more than 70% higher than the same quarter last year. We believe these strong results are attributable to a few meaningful trends.

First, we are clearly benefiting from our focus on the high end of the portable electronic device market where some of our key OEM customers have seen strong demand for their new products, especially smart phones and mid to higher tier mobile phones. During the fourth quarter the production of smart phones accounted for a significant portion of our net sales.

Second, we have begun to ship our Flex assemblies into other popular consumer hand held electronic devices. In the fourth quarter, this type of device generated a meaningful amount of net sales.

Third, we're benefiting from the trend of increased Flex content, especially in many of our newer programs. We believe the technology that is required to package this type of more complex Flex assemblies differentiates MFLEX and gives us a competitive advantage in the market place and helps us win new programs.

And fourth, our customers' product cycles are becoming increasingly short. We believe our ability to quickly ramp production of complex Flex assemblies and reduce our customers' time to market gives us a significant competitive advantage and has been instrumental in helping us win new business.

During the fourth quarter, our four largest customers represented approximately 95% of our net sales which was similar to the third quarter. The mix of net sales by customer improved as expected, with two of our customers accounting for 25% or more of net sales, and two other customers each representing approximately 10% or more of net sales in the quarter.

Sales to three of these four increased compared to the same period last year. As a result, our year over year net sales increased 27.8% in the fourth quarter. On a sequential quarter basis, our sales increased 27.1%. Net sales in the fourth quarter of fiscal 2008 were positively impacted by greater than expected volumes associated with a key customer's launch of two major new products. One of these are the smart phone, and the other was a hand held consumer electronic device.

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