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MultiFineline Electronix Inc. Reports Operating Results (10-Q)

May 06, 2010 | About:
10qk

10qk

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MultiFineline Electronix Inc. (MFLX) filed Quarterly Report for the period ended 2010-03-31.

Multifineline Electronix Inc. has a market cap of $624.4 million; its shares were traded at around $24.58 with a P/E ratio of 13.6 and P/S ratio of 0.9. Multifineline Electronix Inc. had an annual average earning growth of 0.9% over the past 5 years.MFLX is in the portfolios of Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Net sales into the wireless sector decreased to $100.8 million for the three months ended March 31, 2010, from $124.3 million for the three months ended March 31, 2009. The decrease of $23.5 million, or 18.9%, was primarily due to certain programs approaching the end of their life cycle. For the three months ended March 31, 2010 and 2009, the wireless sector was comprised of both smart phones and feature phones, which accounted for approximately 96% and 4%, and 83% and 17% of total sales into the wireless sector, respectively. Sales into the wireless sector comprised approximately 65% and 71% of total net sales for the three months ended March 31, 2010 and 2009, respectively.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales decreased to 85.5% for the three months ended March 31, 2010 compared to 85.8% for the three months ended March 31, 2009. The decrease in cost of sales as a percentage of net sales of 0.3% was primarily attributable to cost reductions from improved labor efficiencies, operational improvement initiatives and overhead reductions, partially offset by price changes and the increase of average material content from new programs in the current and prior fiscal years. Gross profit decreased to $22.3 million for the three months ended March 31, 2010 versus $24.7 million for the three months ended March 31, 2009, or 9.7%. As a percentage of net sales, gross profit increased to 14.5% for the three months ended March 31, 2010 from 14.2% for the three months ended March 31, 2009. We expect quarterly gross margins to be in the 14% to 16% range in the third fiscal quarter of 2010 due to a higher projected sales volume resulting in increased cost absorption.

Net sales into the wireless sector decreased to $253.3 million for the six months ended March 31, 2010, from $273.7 million for the six months ended March 31, 2009. The decrease of $20.4 million, or 7.5%, was primarily due to certain programs approaching the end of their life cycle. For the six months ended March 31, 2010 and 2009, the wireless sector was comprised of both smart phones and feature phones, which accounted for approximately 94% and 6%, and 70% and 30% of total sales into the wireless sector, respectively. Sales into the wireless sector comprised approximately 66% and 70% of total net sales for the six months ended March 31, 2010 and 2009, respectively.

Cost of Sales and Gross Profit. Cost of sales as a percentage of net sales decreased to 84.7% for the six months ended March 31, 2010 compared to 85.2% for the six months ended March 31, 2009. The decrease in cost of sales as a percentage of net sales of 0.5% was primarily attributable to cost reductions from improved labor efficiencies, operational improvement initiatives and overhead reductions, partially offset by price changes and the increase of average material content from new programs in the current and prior fiscal years. As a result, gross profit increased to $58.8 million for the six months ended March 31, 2010 versus $57.7 million for the six months ended March 31, 2009, or 1.9%. As a percentage of net sales, gross profit increased to 15.3% for the six months ended March 31, 2010 from 14.8% for the six months ended March 31, 2009.

For the six months ended March 31, 2010 and 2009, 66% and 70%, respectively, of our net sales were derived from sales to companies that provide products or services to the wireless industry, including wireless handsets, and approximately 31% and 26%, respectively, of our net sales were derived from sales to companies that provide products to the consumer electronics industry during those same periods. In general, the wireless and consumer electronics industries are subject to economic cycles and periods of slowdown. Intense competition, relatively short product life cycles and significant fluctuations in product demand characterize these industries, and both industries are also generally subject to rapid technological change and product obsolescence. Fluctuations in demand for our products as a result of periods of slowdown in these markets (including the current economic downturn) or discontinuation of products or modifications developed in connection with next generation products could reduce our net sales.

For the past several years, a substantial portion of our net sales has been derived from products that are incorporated into products manufactured by or on behalf of a limited number of key customers and their subcontractors, including Apple Inc., Motorola, Inc., Research in Motion Limited and Sony Ericsson Mobile Communications. In addition, a substantial portion of our sales to each customer is often tied to only one, or a small number, of programs. In the fiscal years ended September 30, 2009, 2008 and 2007 approximately 96%, 95% and 93% respectively, of our net sales were to these four customers in the aggregate and approximately 43%, 45% and 57% of our net sales in each of the fiscal years ended September 30, 2009, 2008 and 2007, respectively, were to one customer (not the same customer in each of the three years) and approximately 80%, 65% and 82% of our net sales were to two of our customers in each of the three years, respectively. In addition, two customers constituted approximately 87% of our net sales in the six months ended March 31, 2010. The loss of a major customer or a significant reduction in sales to a major customer, including due to the lack of commercial success of a customers program upon which we were relying, would seriously harm our business. Although we are continuing our efforts to reduce dependence on a limited number of customers, net sales attributable to a limited number of customers and their subcontractors are expected to continue to represent a substantial portion of our business for the foreseeable future.

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