Basis of Presentation (Policies) | 6 Months Ended |
Mar. 31, 2014 |
Principles of Consolidation | ' |
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: MFLEX Suzhou Co., Ltd., (“MFC”) and MFLEX Chengdu Co., Ltd. (“MFLEX Chengdu”); one located in the Cayman Islands: M-Flex Cayman Islands, Inc. (“MFCI”); one located in Singapore: Multi-Fineline Electronix Singapore Pte. Ltd. (“MFLEX Singapore”); one located in Malaysia: Multi-Fineline Electronix Malaysia Sdn. Bhd. (“MFM”); one located in Cambridge, England: MFLEX UK Limited (“MFE”); one located in Korea: MFLEX Korea, Ltd. (“MKR”); and one located in the Netherlands: MFLEX B.V. (“MNE”). All significant intercompany transactions and balances have been eliminated in consolidation. |
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s 2013 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 statement of the periods indicated. All such adjustments are of a normal recurring nature. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. Operating results for the three and six months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2014. Unless otherwise indicated, the financial information in these notes is presented in thousands (except per share amounts). |
Fair Value Measurements | ' |
Fair Value Measurements |
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The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximated fair value due to their short maturities. For recognition purposes, on a recurring basis, the Company’s assets and liabilities related to money market funds and derivative financial instruments are measured at fair value at the end of each reporting period. The fair value of the Company’s money market funds were measured using Level 1 fair value inputs and the fair value of the Company’s derivative assets and liabilities were measured using Level 2 fair value inputs, which consisted of observable market-based inputs of foreign currency spot and forward rates quoted by major financial institutions. |
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The Company’s assets and liabilities measured at fair value on a recurring basis subject to the disclosure requirements as defined under the Financial Accounting Standards Board (“FASB”) authoritative accounting guidance were as follows: |
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| Fair Value Measurements of Assets and Liabilities | | | | | |
on a Recurring Basis as of | | | | |
March 31, 2014 | | | | |
| Level 1 | | | Level 2 | | | Level 3 | | | | | |
Money market funds (cash and cash equivalents) | $ | 14,800 | | | $ | - | | | $ | - | | | | | |
Forward contracts (accrued liabilities) | | - | | | | 471 | | | | - | | | | | |
| $ | 14,800 | | | $ | 471 | | | $ | - | | | | | |
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| Fair Value Measurements of Assets and Liabilities | | | | | |
on a Recurring Basis as of | | | | |
September 30, 2013 | | | | |
| Level 1 | | | Level 2 | | | Level 3 | | | | | |
Money market funds (cash and cash equivalents) | $ | 14,141 | | | $ | - | | | $ | - | | | | | |
Forward contracts (other current assets) | | - | | | | 179 | | | | - | | | | | |
Forward contracts (accrued liabilities) | | - | | | | (34 | ) | | | - | | | | | |
| $ | 14,141 | | | $ | 145 | | | $ | - | | | | | |
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As of March 31, 2014, assets held for sale were measured at fair value on a non-recurring basis for the Company's single reporting unit. Based on the relevant FASB guidance, the carrying value of assets held for sale was written down to $9,569 after recording a non-cash impairment charge of $11,549 during the three months ended March 31, 2014 (refer to Note 8). The fair value of the assets was determined using Level 3 unobservable inputs not corroborated by market data, consisting of third-party offers for the building and equipment. Below is a summary of the Company’s assets measured at fair value on a non-recurring basis as of March 31, 2014: |
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| Fair Value Measurements of Assets | | | | | | | | | |
on a Non-Recurring Basis as of | | | | | | | | | |
March 31, 2014 | | | | | | | | | |
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| Level 1 | Level 2 | Level 3 | | | | | | | | | |
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Building and equipment (assets held for sale) | $ | — | $ | — | $ | 9,569 | | | | | | | | | |
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| $ | — | $ | — | $ | 9,569 | | | | | | | | | |
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No assets or liabilities were measured at fair value on a non-recurring basis as of September 30, 2013. |
Inventories | ' |
Inventories |
Inventories, net of applicable write-downs, were composed of the following: |
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| March 31, | | | September 30, | | | | | | | | | |
2014 | 2013 | | | | | | | | |
Raw materials and supplies | $ | 15,260 | | | $ | 27,080 | | | | | | | | | |
Work-in-progress | | 14,316 | | | | 20,965 | | | | | | | | | |
Finished goods | | 28,204 | | | | 38,808 | | | | | | | | | |
| $ | 57,780 | | | $ | 86,853 | | | | | | | | | |
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Property, Plant and Equipment | ' |
Property, Plant and Equipment |
Property, plant and equipment, net, were composed of the following: |
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| March 31, | | | September 30, | | | | | | | | | |
2014 | 2013 | | | | | | | | |
Building | $ | 52,598 | | | $ | 68,679 | | | | | | | | | |
Machinery and equipment | | 353,678 | | | | 406,010 | | | | | | | | | |
Computers and capitalized software | | 12,663 | | | | 13,014 | | | | | | | | | |
Leasehold improvements | | 14,284 | | | | 14,145 | | | | | | | | | |
Construction-in-progress | | 2,262 | | | | 5,307 | | | | | | | | | |
| $ | 435,485 | | | $ | 507,155 | | | | | | | | | |
Accumulated depreciation and amortization | | (237,887 | ) | | | (263,099 | ) | | | | | | | | |
| $ | 197,598 | | | $ | 244,056 | | | | | | | | | |
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Accrued Liabilities | ' |
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Accrued Liabilities |
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Accrued liabilities were composed of the following: |
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| March 31, | | | September 30, | | | | | | | | | |
2014 | 2013 | | | | | | | | | |
Wages and compensation | $ | 10,109 | | | $ | 16,822 | | | | | | | | | |
Restructuring expenses¹ | | 7,771 | | | | - | | | | | | | | | |
Other accrued expenses | | 18,178 | | | | 14,637 | | | | | | | | | |
| $ | 36,058 | | | $ | 31,459 | | | | | | | | | |
1 | Refer to Note 8 for further information on the Company’s impairment and restructuring activities during the three months ended March 31, 2014. | | | | | | | | | | | | | | |
Product Warranty Accrual | ' |
Product Warranty Accrual |
Changes in the product warranty accrual for the three months ended March 31, 2014 and 2013 were as follows: |
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| Balance at | | | Warranty | | | Provision for | | | Balance at | |
January 1 | Expenditures | Estimated | March 31 |
| | Warranty Cost | |
Fiscal 2014 | $ | 1,452 | | | $ | (1,234 | ) | | $ | 1,596 | | | $ | 1,814 | |
Fiscal 2013 | $ | 315 | | | $ | (425 | ) | | $ | 333 | | | $ | 223 | |
Changes in the product warranty accrual for the six months ended March 31, 2014 and 2013 were as follows: |
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| Balance at | | | Warranty | | | Provision for | | | Balance at | |
October 1 | Expenditures | Estimated | March 31 |
| | Warranty Cost | |
Fiscal 2014 | $ | 1,076 | | | $ | (2,245 | ) | | $ | 2,983 | | | $ | 1,814 | |
Fiscal 2013 | $ | 346 | | | $ | (826 | ) | | $ | 703 | | | $ | 223 | |
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Net Income Per Share-Basic and Diluted | ' |
Net Income Per Share—Basic and Diluted |
The following table presents a reconciliation of basic and diluted shares for the three and six months ended March 31, 2014 and 2013: |
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| Three Months Ended | | | Six Months Ended | |
March 31, | March 31, |
| 2014 | | | 2013 | | | 2014 | | | 2013 | |
Basic weighted-average number of common shares outstanding | | 24,090,754 | | | | 23,798,587 | | | | 24,087,306 | | | | 23,796,966 | |
Dilutive effect of potential common shares | | - | | | | - | | | | - | | | | - | |
Diluted weighted-average number of common and potential | | 24,090,754 | | | | 23,798,587 | | | | 24,087,306 | | | | 23,796,966 | |
common shares outstanding |
Potential common shares excluded from the per share | | 934,394 | | | | 831,603 | | | | 870,692 | | | | 838,621 | |
computations as the effect of their inclusion would not |
be dilutive |
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Commitments and Contingencies | ' |
Commitments and Contingencies |
Litigation |
The Company is involved in litigation from time to time in the ordinary course of business. Management does not believe the outcome of any currently pending matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. |
Other Commitments |
The Company has outstanding purchase and other commitments, which exclude amounts already recorded on the Condensed Consolidated Balance Sheets. The outstanding purchase commitments to acquire capital assets and other materials and services totaled $7,889 and $6,454 as of March 31, 2014 and September 30, 2013, respectively. |
Pursuant to the laws applicable to the People’s Republic of China’s Foreign Investment Enterprises, the Company’s two wholly owned subsidiaries in China, MFC and MFLEX Chengdu, are restricted from paying cash dividends on 10% of after-tax statutory profit, subject to certain cumulative limits. These restrictions as of March 31, 2014 and September 30, 2013 were $19,825 and $19,838, respectively. |
Significant Concentrations | ' |
Significant Concentrations |
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The Company’s net sales into its largest industry sectors, as a percentage of total net sales, are presented below: |
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| Three Months Ended | | | Six Months Ended | |
March 31, | March 31, |
| 2014 | | | 2013 | | | 2014 | | | 2013 | |
Smartphones | | 74 | % | | | 65 | % | | | 74 | % | | | 67 | % |
Tablets | | 11 | % | | | 28 | % | | | 15 | % | | | 26 | % |
Consumer electronics | | 10 | % | | | 5 | % | | | 8 | % | | | 6 | % |
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