Multi-Fineline Electronix F2Q09 (Qtr End 3/31/09) Earnings Call Transcript

Transcript by:

Multi-Fineline Electronix, Inc. (MFLX)

F2Q09 (Qtr End 3/31/09) Earnings Call

May 07, 2009 5:30 PM ET

Executives

Reza Meshgin - President and Chief Executive Officer

Lasse Glassen - Investor Relations

Tom Liguori - Executive Vice President, Chief Financial Officer

Analysts

Matthew Sheerin - Thomas Weisel Partners

Richard Kugele - Needham & Company

Ryan Jones

Jiwon Lee - Sidoti and Company

Presentation

Operator

Ladies and gentlemen, thank you for standing-by. Welcome to the MFLEX Fiscal 2009 Second Quarter Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Thursday, May 7, 2009.

I would now like to turn the conference over to Reza Meshgin, President and CEO of MFLEX. Please go ahead, sir.

Reza Meshgin

Thank you. Welcome to MFLEX's fiscal 2009 second quarter conference call. Today I will discuss our operational highlights and business outlook and Tom Liguori, our CFO will discuss our financial results for the second quarter of fiscal 2009. Phil Harding, our Chairman, Tom and I will be available to answer your questions at the conclusion of our presentation. Lasse Glassen, from the Financial Relations Board will now review our forward-looking statements before we begin our discussion.

Lasse Glassen

Thank you, Reza, and good afternoon everyone. I would 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, cash flow, tax rates, DSO, DIO, gross margin, the pricing environment, cost reductions, expenses, yields, labor efficiency growth and diversification of the company's customer base, expected demand from the company's customers and for products within different market including the effect of the economy on such demand, market opportunities and competitive advantages; expected benefits from the acquisition of Pelikon; the utilization of flex and flex assemblies; programs and product mix; the cost and benefits of new programs; the company's manufacturing facilities, capabilities, capacity, and expansion thereof; including the MFC3 project and solid operation, the company's ability to ramp production; uses of the company's cash; credit facilities; and liquidity.

Additional forward-looking statements include but they are not limited to statements pertaining to other financial items plans, strategies, objectives of management, the future operations, the company's operations and financial conditions or prospects and any other statement that is not include is not historical fact including any statement which is 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 expectation. 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 in this afternoon's news release. Forward-looking statements represent the company's judgment as of the day of this call. The company disclaims any intent or obligation to update these forward-looking statements.

And with that, I would now like to turn the call back over to Reza. Reza?

Reza Meshgin

Thank you, Lasse. Second quarter operating results were generally inline with our expectation, with customer orders reflective of the ongoing sluggish global economic condition. During the second quarter, we generated net sales of $174.1 million, which was an increase of 6% compared to net sales of $163.9 million in the same period last year, but down from the recognized sales of $216.6 million we achieved in the first quarter.

At the bottom-line, we recorded net income of $8.7 million or $0.34 per diluted share. This compares to net income of 10.4 million or $0.41 per diluted share in the second quarter of fiscal 2008 and $14.1 million or $0.56 per diluted share in the previous quarter.

In addition, our businesses continue to generate a significant amount of cash. Cash flow from operating activities was $46 million for the quarter or more than 40% higher than the same quarter last year. And while we continue to invest in our company through our stock repurchase program as of March 31, 2009, cash and cash equivalents increased to $106 million or more than $4 per diluted share. From a demand standpoint there were not many surprises either positive or negative during the quarter.

As expected, the sequential decline in revenues was due to the slumping macroeconomic condition coupled with the normal seasonal effect of the December holidays and the Chinese New Year in late January.

During the second quarter, our four largest customers represented approximately 96% of our net sales, which was similar to the last several quarters. As you are probably aware, for comparative and customer confidentiality reasons, we do not disclose these large customers by name, but instead we refer to them as customer A, B, C and D.

During the second quarter, customer A represented 5% of net sales, customer B represented 8% customer C represented about 35% and customer D represented approximately 48% of net sales.

Sales to customer C and D increased significantly from the prior year, while sales to customer A and B declined significantly. These results are a continued reflection of our success in supplying flex assemblies to the high-end portable electronic device market, including smartphones that continue to experience a healthy demand.

Read the rest of this transcript for free on seekingalpha.com