Multi-Fineline Electronix, Inc. (MFLEX) has reported net sales of $216.6 million for the first quarter of fiscal 2009, compared with the net sales of $184.2 million in the year-ago quarter. It has also reported net income of $14.1 million, or $0.56 per diluted share, for the first quarter of fiscal 2009, compared with the net income of $13.6 million, or $0.54 per diluted share in the year-ago quarter.
The increase in net sales was primarily due to higher sales to two of the company’s key customers. MFLEX’s key customers currently include four leading manufacturers of portable electronic devices.
Sequentially, from the fourth quarter of fiscal 2008 to the first quarter of fiscal 2009, net sales increased 1.7%. During the first quarter of fiscal 2009, the company’s three largest customers each accounted for 10%or more of net sales, with two of such customers each accounting for 25%or more of net sales. A fourth key customer represented 9%of net sales during the first quarter of fiscal 2009.
We saw strong order flow throughout the December quarter, which helped drive net sales above our expectations, said Reza Meshgin, chief executive officer of MFLEX. Despite the challenging global economic environment, the Company saw strong demand for its flex assemblies, particularly for smartphones. We have also expanded our relationship with one of our key customers, which has already resulted in significant new programs for other consumer electronic devices. While start-up programs typically depress our gross margins, the Company placed a high priority on improving the yields on these programs during the first quarter to mitigate this issue. Our operations team executed well in efficiently ramping these new programs, which helped us exceed our gross margin expectations for the first quarter.
Financial Highlights
Gross margin during the first quarter of fiscal 2009 was 15.3%, compared to 16.7%for the same period in the prior year. The decline in gross margin is primarily attributable to higher material content in the first quarter 2009 product mix.
Sequentially, gross margin declined from 16.1%in the fourth quarter of fiscal 2008. Although gross margin declined sequentially, the first quarter gross margin exceeded the company’s expectations primarily due to improved yields on start-up programs.
Cash flow from operating activities for the first quarter of fiscal 2009 was $20.2 million. This compares to $12.2 million in the comparable period in fiscal 2008.
Share Repurchase Program
As announced on January 5, 2009, the board of directors of MFLEX approved a share repurchase program for up to 2,250,000 shares in the aggregate of the company’s common stock. A 10b5-1 plan has been established to implement the first tranche of the share repurchase program totaling 562,500 shares. The first shares under this program were repurchased during the week of January 5, 2009.
Outlook
For the second quarter of fiscal 2009, the company expects net sales to range between $170 and $190 million, and gross margin to range between 13 and 15%based on the projected product mix and leveraging of manufacturing costs.
Commenting on the company’s business outlook, Meshgin said, We remain concerned regarding the potential impact that a prolonged economic slowdown could have on customer demand, and recently we have begun to see softness in customer orders. While our second quarter net sales projections reflect expected year-over-year growth, we currently expect a sequential decline due in part to the economic downturn and in part due to the seasonal effect of the December holidays and the Chinese New Year in January 2009.
Longer-term, we are optimistic about our opportunities to continue profitably growing the Company. Our pursuit of new relationships with OEMs has been enhanced by the new technology we can offer as a result of our recent acquisition of Pelikon Limited. With our strong design capabilities, proven manufacturing excellence, and unique new technology solutions, we believe we are well positioned to grow our customer base in the coming years, said Meshgin.