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Multi-Fineline Electronix, Inc., a leading global provider of high-quality, technologically advanced flexible printed circuits and assemblies, today reported financial results for its first quarter ended March 31, 2016. Net sales for first quarter 2016 were $101.2 million, compared to $149.1 million for the same period last year. The decline was mainly attributable to softness in the smartphone market. The Company's largest customer represented 80 percent of total first quarter net sales.
Gross margin for the quarter was 1.6 percent, compared to 12.8 percent in the same period of the prior year. The decline was primarily due to lower overhead absorption and direct labor efficiencies as a result of the reduced net sales level.
First quarter 2016 operating expenses were $10.8 million, including $1.7 million of merger and acquisition-related expenses and $1.0 million of stock-based compensation expense. This compares to operating expenses of $9.7 million in the prior year period, which included a $1.2 million impairment and restructuring gain and $1.2 million of stock-based compensation expense.
First quarter 2016 net loss was $9.7 million, or $(0.40) per diluted share, compared to net income of $9.1 million, or $0.36 per diluted share, in the same period last year.
The Company continues to maintain a strong balance sheet with no debt, with cash and cash equivalents of $205.7 million at March 31, 2016. The Company used $0.6 million in cash flows from operating activities during the first quarter. Capital expenditures were $6.1 million in first quarter 2016.
Reza Meshgin, Chief Executive Officer of MFLEX commented, "Our first quarter net sales results were impacted by softness in the smartphone market. Despite the lower sales, we successfully managed working capital, maintaining a strong cash balance of $206 million. However, the reduced sales volume significantly impacted our profitability during the quarter."
Mr. Meshgin continued, "While we anticipate softness in demand within the smartphone market to continue in the second quarter, we expect a rebound in demand in the second half of the year based on anticipated new program ramps. Additionally, our previously announced merger with DSBJ is progressing, with closing expected to occur during the third quarter of 2016."
Non-GAAP net loss for first quarter 2016 was $7.1 million, or $(0.29) per diluted share, compared to non-GAAP net income of $9.6 million, or $0.38 per diluted share, in the same period of the prior year. A reconciliation of GAAP net (loss) income and net (loss) income per share to non-GAAP net (loss) income and net (loss) income per share is provided in the table at the end of this press release.
Acquisition by DSBJ
The Company expects to close its previously announced acquisition by Suzhou Dongshan Precision Manufacturing Co., Ltd. ("DSBJ") in third quarter 2016, subject to approval by MFLEX and DSBJ stockholders and the fulfillment of other required closing conditions, including antitrust review in the U.S., which has been completed; antitrust review in the People's Republic of China ("PRC"), for which the PRC Ministry of Commerce Phase I review period expires on May 6, 2016; review and clearance by the Committee on Foreign Investment in the U.S. ("CFIUS"), the filing for which was accepted by CFIUS on May 3, 2016 which commenced a 30 day initial review period to be concluded on or about June 2, 2016 at which point CFIUS can decide to conclude its review with no further action, or to extend its review by an additional 45 days if CFIUS believes it needs additional time; and other customary closing conditions. MFLEX intends to hold its stockholder meeting to approve the transaction on June 17, 2016, and has been advised that DSBJ intends to hold its stockholders meeting to approve the transaction on May 12, 2016. Additional details regarding the transaction can be found in the Company's definitive proxy statement on Schedule 14A filed with the Securities and Exchange Commission (the "SEC") on April 28, 2016.
MFLEX is a global provider of high-quality, technologically advanced flexible printed circuits and assemblies to the consumer electronics industry with manufacturing facilities in Suzhou, China. The Company provides a seamless, integrated end-to-end flexible printed circuit solution for customers, ranging from design and application engineering, prototyping and high-volume manufacturing to turnkey component assembly and testing. The Company targets its solutions within the consumer electronics market and, in particular, focuses on applications where flexible printed circuits are the enabling technology in achieving a desired size, shape, weight or functionality of an electronic device. Current applications for the Company's products include smartphones, tablets, computer/data storage, portable bar code scanners, personal computers, wearables and other consumer electronic devices. MFLEX's common stock is quoted on the Nasdaq Global Select Market under the symbol MFLX.