UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-50812
MULTI-FINELINE ELECTRONIX, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 95-3947402 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
3140 East Coronado Street
Anaheim, CA 92806
(Address of principal executive offices, Zip Code)
(714) 238-1488
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act). Yes ¨ No x
The number of outstanding shares of the registrant’s Common Stock, $0.0001 par value, as of May 6, 2005 was 23,701,840.
Multi-Fineline Electronix, Inc.
Index
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. |
Condensed Consolidated Financial Statements (unaudited) | 1 | ||
| 1 | ||||
| 2 | ||||
| 3 | ||||
| 4 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 28 | ||
| Item 4. |
Controls and Procedures | 28 | ||
| PART II. OTHER INFORMATION | ||||
| Item 6. |
Exhibits | 28 | ||
| Signatures |
||||
Part I. FINANCIAL INFORMATION
| Item 1. | Financial Statements |
MULTI-FINELINE ELECTRONIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(unaudited)
| March 31, 2005 |
September 30, 2004 | |||||
| ASSETS | ||||||
| Cash and cash equivalents |
$ | 26,349 | $ | 16,631 | ||
| Short term investments |
17,465 | 21,565 | ||||
| Restricted cash |
612 | 181 | ||||
| Accounts receivable, net of allowances of $341 and $250 |
51,530 | 44,382 | ||||
| Inventories |
37,118 | 39,217 | ||||
| Due from affiliates |
213 | 43 | ||||
| Deferred taxes |
3,258 | 3,343 | ||||
| Other current assets |
690 | 807 | ||||
| Total current assets |
137,235 | 126,169 | ||||
| Property, plant and equipment, net |
65,797 | 59,914 | ||||
| Restricted cash |
124 | 122 | ||||
| Deferred taxes |
1,205 | 1,790 | ||||
| Other assets |
3,617 | 2,003 | ||||
| Total assets |
$ | 207,978 | $ | 189,998 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Accounts payable |
$ | 26,098 | $ | 26,079 | ||
| Accrued liabilities |
8,891 | 5,990 | ||||
| Due to affiliates |
1,687 | 5,471 | ||||
| Line of credit |
4,950 | 3,369 | ||||
| Income taxes payable |
4,860 | 6,299 | ||||
| Total current liabilities |
46,486 | 47,208 | ||||
| Other liabilities |
371 | 361 | ||||
| Deferred taxes |
1,345 | 1,345 | ||||
| Total liabilities |
48,202 | 48,914 | ||||
| Commitments and contingencies (Note 2) |
||||||
| Stockholders’ equity |
||||||
| Preferred stock, $0.0001 par value, 5,000,000 shares authorized; none issued or outstanding |
— | — | ||||
| Common stock, $0.0001 par value; 100,000,000 shares authorized; 23,605,940 and 23,264,835 shares issued and outstanding |
2 | 2 | ||||
| Additional paid-in capital |
90,435 | 89,110 | ||||
| Retained earnings |
69,336 | 51,971 | ||||
| Accumulated other comprehensive income |
3 | 1 | ||||
| Total stockholders’ equity |
159,776 | 141,084 | ||||
| Total liabilities and stockholders’ equity |
$ | 207,978 | $ | 189,998 | ||
The accompanying notes are an integral part of these consolidated financial statements.
1
MULTI-FINELINE ELECTRONIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Share and Per Share Data)
(unaudited)
| Three Months Ended March 31, |
Six Months Ended March 31, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| Net sales |
$ | 77,392 | $ | 56,516 | $ | 161,804 | $ | 109,966 | ||||||||
| Cost of sales |
58,873 | 42,933 | 123,442 | 88,695 | ||||||||||||
| Gross profit |
18,519 | 13,583 | 38,362 | 21,271 | ||||||||||||
| Operating expenses |
||||||||||||||||
| Sales and marketing |
2,263 | 1,998 | 4,429 | 3,778 | ||||||||||||
| General and administrative (includes stock-based compensation expense of $99, $99, $0 and $14 for the three and six months ended March 31, 2005 and 2004, respectively) |
4,185 | 3,152 | 8,016 | 5,673 | ||||||||||||
| Total operating expenses |
6,448 | 5,150 | 12,445 | 9,451 | ||||||||||||
| Operating income |
12,071 | 8,433 | 25,917 | 11,820 | ||||||||||||
| Other (income) expense, net |
||||||||||||||||
| Interest expense |
65 | 284 | 101 | 405 | ||||||||||||
| Interest income |
(168 | ) | (24 | ) | (274 | ) | (27 | ) | ||||||||
| Other (income) expense |
(91 | ) | 99 | (62 | ) | 259 | ||||||||||
| Income before provision for income taxes |
12,265 | 8,074 | 26,152 | 11,183 | ||||||||||||
| Provision for income taxes |
(4,370 | ) | (2,317 | ) | (8,787 | ) | (3,281 | ) | ||||||||
| Net income |
$ | 7,895 | $ | 5,757 | $ | 17,365 | $ | 7,902 | ||||||||
| Net income per share |
||||||||||||||||
| Basic |
$ | 0.34 | $ | 0.32 | $ | 0.74 | $ | 0.45 | ||||||||
| Diluted |
$ | 0.32 | $ | 0.30 | $ | 0.70 | $ | 0.42 | ||||||||
| Shares used in computing net income per share |
||||||||||||||||
| Basic |
23,468,084 | 18,257,835 | 23,368,087 | 17,724,885 | ||||||||||||
| Diluted |
24,894,249 | 19,336,815 | 24,698,791 | 18,659,958 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
MULTI-FINELINE ELECTRONIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(unaudited)
| Six Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from operating activities |
||||||||
| Net income |
$ | 17,365 | $ | 7,902 | ||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities |
||||||||
| Depreciation and amortization |
5,098 | 2,938 | ||||||
| Loss from equity method investee |
— | 205 | ||||||
| Provision for doubtful accounts |
269 | 78 | ||||||
| Deferred taxes |
670 | (69 | ) | |||||
| Stock-based compensation expense |
99 | 14 | ||||||
| Loss on disposal of equipment |
105 | 34 | ||||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable |
(7,417 | ) | (16,922 | ) | ||||
| Inventories |
2,099 | (6,363 | ) | |||||
| Due to/from affiliates, net |
(3,954 | ) | 2,730 | |||||
| Other current assets |
117 | 5 | ||||||
| Other assets |
(1,715 | ) | (639 | ) | ||||
| Accounts payable |
19 | (2,742 | ) | |||||
| Accrued liabilities |
2,900 | 2,088 | ||||||
| Income tax payable |
(1,439 | ) | 1,657 | |||||
| Other liabilities |
10 | 9 | ||||||
| Net cash provided by (used in) operating activities |
14,226 | (9,075 | ) | |||||
| Cash flows from investing activities |
||||||||
| Sale of short term investments |
4,100 | — | ||||||
| Cash paid for property and equipment |
(10,512 | ) | (10,971 | ) | ||||
| Purchases of software and capitalized internal-use software |
(84 | ) | (62 | ) | ||||
| Deposits on property and equipment |
(410 | ) | (280 | ) | ||||
| Cash advances to equity method investee |
— | (242 | ) | |||||
| Proceeds from sale of equipment |
22 | 509 | ||||||
| Increase in restricted cash, net |
(433 | ) | — | |||||
| Net cash used in investing activities |
(7,317 | ) | (11,046 | ) | ||||
| Cash flows from financing activities |
||||||||
| Borrowings on line of credit |
4,950 | 14,326 | ||||||
| Payments on line of credit |
(3,369 | ) | (3,410 | ) | ||||
| Proceeds from note payable |
— | 7,602 | ||||||
| Principal payments on note payable |
— | (4,611 | ) | |||||
| Proceeds from exercise of stock options |
1,226 | — | ||||||
| Proceeds from issuance of common stock, net of issuance costs of $0 and $80 |
— | 10,172 | ||||||
| Net cash provided by financing activities |
2,807 | 24,079 | ||||||
| Effect of exchange rate changes on cash |
2 | (22 | ) | |||||
| Net increase in cash |
9,718 | 3,936 | ||||||
| Cash and cash equivalents at beginning of period |
16,631 | 5,211 | ||||||
| Cash and cash equivalents at end of period |
$ | 26,349 | $ | 9,147 | ||||
| Non-cash financing activities |
||||||||
| Issuance of common stock to Wearnes |
— | $ | 15,000 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
3
MULTI-FINELINE ELECTRONIX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share Data)
(unaudited)
1. DESCRIPTION OF BUSINESS
Multi-Fineline Electronix, Inc. (the “Company”) was incorporated in 1984 in the State of California. The Company is primarily engaged in the engineering, design and manufacture of flexible printed circuit boards along with related component assemblies.
In February 2004, the board of directors approved the reincorporation of the Company from California to Delaware. On June 4, 2004, the Company completed the reincorporation and effected a 15 for 1 forward stock split. The reincorporation and the stock split have been given retroactive effect in the accompanying consolidated financial statements. In connection with the reincorporation completed in June 2004, the authorized number of shares of common stock decreased to 100,000,000, and 5,000,000 shares of preferred stock, par value $0.0001, were authorized.
Affiliates and subsidiaries of WBL Corporation Limited (collectively “Wearnes”), a Singapore company, owned approximately 63% and 64% of the Company’s outstanding common stock as of March 31, 2005 and September 30, 2004, allowing Wearnes to exercise operating control over the Company.
On June 30, 2004, the Company closed an underwritten public offering of 5,000,000 shares at a price of $10 per share. Proceeds, net of commissions of $3,500 and offering expenses of $1,890, totaled $44,610.
2. BASIS OF PRESENTATION
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has two wholly owned subsidiaries located in China: Multi-Fineline Electronix (Suzhou) Co., Ltd. (“MFC1”) and Multi-Fineline Electronix (Suzhou No. 2) Co., Ltd. (“MFC2”). All significant intercompany transactions and balances have been eliminated.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s 2004 Annual Report on Form 10-K. The financial information presented in the accompanying statements reflects all adjustments that are, in the opinion of management, necessary for a fair presentation of the periods indicated. All such adjustments are of a normal recurring nature.
Short-Term Investments