Contact: Buddy Barnes
Chief Financial Officer
RF Monolithics, Inc.
972-448-3789 bbarnes@rfm.com
RFM Reports Return to Profitability with Increased Sales over Previous Quarter
DALLAS--(BUSINESS WIRE)-January 10, 2012--RF Monolithics,
Inc. (NASDAQ: RFMI) (RFM or the Company) today reported net
income of $76,000 or $0.01 per share for its first quarter
ended November 30, 2011 (the current quarter). This compares
to net income for the quarter ended November 30, 2010 (the
comparable quarter) of $160,000 or $0.01 per share and net
loss of $81,000 or $0.01 per share for the fourth quarter of
our prior fiscal year ended August 31, 2011 (the sequential
quarter).
The Company reported sales of $8.4 million for the current
quarter, which was essentially flat with $8.5 million in
sales for the comparable quarter and 4% above the $8.1
million for the sequential quarter. Gross margins were 31.5%
for the current quarter, compared to 35.4% for the comparable
quarter and 31.3% for the sequential quarter.
RFM's President and CEO Farlin Halsey said, "We are pleased
to once again report profitability on a quarterly basis.
Wireless Solutions segment sales increased 6% from both the
comparable quarter and our sequential quarter, while our
overall sales have remained steady in this continued soft
economic environment. As mentioned in prior releases, we have
made significant progress in solving the production issues in
our supply chain as reflected by the sales increase. The
increase in sales from the sequential quarter and lower
operating expenses resulted in our return to
profitability."
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"Our recently renewed bank working capital facility was
extended for two years and provides RFM improved terms and a
reduced interest rate floor. Additionally, we renewed and
extended our mortgage facility for 10 years at a lower
interest rate. We continue to effectively manage our
business, develop new products and increase sales
opportunities in anticipation of economic recovery."
"We are focused on several product and market initiatives
that, if successful, will position RFM for growth. Product
launches over the last 18 months are starting to gain
traction, while we continue to more broadly expand our
product promotional efforts. In the current quarter, we saw
sales activity relating to approximately twenty new business
opportunities, each representing progress towards improved
sales for the second half of fiscal 2012. Several of these
opportunities became available due to the improvements we
have recently made in our global distribution network.
Further, we continue to develop additional programs designed
to enhance our collaboration with Murata Manufacturing Co.,
Ltd.," Halsey said.
Halsey added, "We remain optimistic regarding 2012, as a
number of forecasted new sales opportunities begin production
shipments later this year. We have a broad set of products,
with enabling technology, that we believe are well suited to
meet market needs. As economic conditions permit and our
customers ramp up their production, we believe that we are
well positioned for top line growth with a scalable business
model for increasing our bottom line."
• Sales increased 4% over the sequential quarter and were
essentially flat with the comparable quarter. The production
issues mentioned in the previous report were successfully
addressed as sales of our patented Virtual
WireTM short range radio product were at their
highest level in two years, with deliveries largely matching
customer request dates.
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• Sales to our targeted medical market increased more than
25% in comparison to both the comparable quarter and the
sequential quarter. Sales to automotive and consumer markets
increased by 5% or more in comparison to those same periods.
Economic conditions in these markets improved and we are
seeing some traction with new products. However, sales to the
industrial market decreased approximately 10% from the
referenced quarters as economic conditions were not robust in
that market.
• Two factors favorably affected our gross margin performance
representing long- term strategies for improvement. The first
is segment revenue mix, as Wireless Solution segment sales
were 50% of total sales in the current quarter versus 47% of
total sales in the comparable quarter. Secondly, we benefited
from a reduction in overhead cost of sales of approximately
200 basis points as a percentage of sales from both the
comparable quarter and the sequential quarter. However, lower
sales of higher-margin mature products resulted in an
unfavorable margin shift related to product mix and a lower
overall gross margin in comparison to the comparable quarter.
Gross margins did improve over the sequential quarter.
• Operating expenses of $2.5 million were 11% lower than the
comparable quarter and 3% lower than the sequential quarter.
General and administrative expenses were relatively higher a
year ago due to legal expenses for a favorably settled
arbitration hearing and they were higher in the sequential
quarter due to previously disclosed accounts receivable
reserves. Total operating expenses represent 30% of total
sales.
• Net income for the current quarter of $76,000 increased
from a net loss of
$81,000 in the sequential quarter due to higher sales,
slightly improved gross margins and lower operating expenses.
However, while earnings per share of
$0.01 was unchanged from the comparable quarter, net income
decreased from
2% of sales to 1% of sales due to lower gross margins,
partially offset by lower operating expenses.
• We generated positive adjusted earnings before interest,
taxes, depreciation and amortization including stock
compensation expense, or Adjusted EBITDA, of
$394,000 for the current quarter.
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• We renewed our bank revolving line of credit agreement,
which now matures in November 2013. Total bank debt with View
Point Bank increased $485,000 from the sequential quarter end
to just over $2.9 million. At the end of the current quarter
we had $2.8 million unused and available on our revolving
line of credit, which carries an interest rate of the Wall
Street Journal Prime Rate plus 2%. The new interest rate
floor is 5.25%, down from 7%.
• Effective December 2011, we renewed and extended our
mortgage note agreement with View Point Bank, at a fixed
interest rate of 5.5% for the first five years. The previous
interest rate on this borrowing was 6.5%. The maturity was
extended from 2014 to 2021.
• Wireless Solutions segment sales increased 6% in comparison
to both the comparable quarter and the sequential quarter
primarily due to increases in sales to the medical market of
27% over the comparable quarter and 43% over the sequential
quarter, respectively. Several medical customers were
attempting to reduce inventories in the comparable quarter.
Also, the current quarter benefited from a surge in
previously postponed shipments for Virtual Wire
TM short range radio products as production
issues from prior periods eased. Partially offsetting this
increase was reduced sales to the industrial market,
primarily for RF modules as production schedule volumes for
several customers decreased.
• Wireless Components segment sales decreased 8% in
comparison to the comparable quarter, but increased 2% over
the sequential quarter. Wireless Components segment sales are
largely to the automotive, consumer and other markets. Sales
to the automotive markets increased 9% from the comparable
quarter, and increased 5% from our sequential quarter, in
line with automotive production schedules. Sales to consumer
markets increased by 9% or more over both periods due to
improved distribution sales. The decrease in sales from the
comparable quarter was largely due to a 47% decrease in sales
to other markets, including government and telecommunications
applications. A year ago, we
participated in a program, which has now ended, for a high
reliability filter. Also,
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some of our mature low-power component and frequency control
module products continue to decline in sales. We continue to
focus on new products to replace declining sales for older
products.
• Current quarter gross profit margin was 31.5%, which was
down 390 basis points from the comparable quarter but up 20
basis points from our sequential quarter. The decrease from
the comparable quarter was due to a decrease in gross margin
for each of our segments:
o Gross margin for our Wireless Component segment decreased from an unusually high 31.4% in the comparable quarter to a more normal 28.5% in the current quarter. The comparable quarter benefited from a very favorable product mix of sales to other markets. Gross margins increased from 25.2% in the sequential quarter due to the decrease in overhead cost of sales.
o Gross margin for our Wireless Solutions segment decreased from a relatively normal range of 39.9% in the comparable quarter and 37.6% in the sequential quarter to a relatively low 34.5% in the current quarter. The current quarter included increased material prices in our supply chain and incremental costs involved in addressing our production issues. We have focused increased resources on these production issues and anticipate lower costs in future periods, as many of these issues have been resolved and others are expected to be resolved this quarter. In addition, the decrease in sales of RF modules had an unfavorable effect on product mix within this segment.
• Operating cash flow for our current quarter was a negative
$529,000, primarily due to two sizeable uses of operating
cash--an increase in accounts receivable of approximately
$600,000 resulting from higher sales and a reduction in
accounts payable of $270,000. Accounts receivable collections
remain at normal levels, with our days sales outstanding
remaining in the mid fifty day range. In fact, we collected
significant amounts from the customer that represented a
potential
collection concern in the comparable quarter, allowing us to
reduce our reserve by
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$35,000. Accounts payable returned to normal levels after
being unusually high due to the timing of payments in the
sequential quarter.
Segment mix for current, sequential and comparable quarter
sales:
Segment | Q1 FY12 | Q4 FY11 | Q1 FY11 |
Wireless Solutions | $4.2 Million | $4.0 Million | $4.0 Million |
Wireless Components | $4.2 Million | $4.1 Million | $4.5 Million |
Total Sales $8.4 Million $8.1 Million $8.5 Million
Market diversification for current, sequential and comparable
quarter sales:
Q1 FY12* | Q4 FY11* | Q1 FY11* | |
Automotive | 38% | 37% | 34% |
Consumer | 9% | 8% | 7% |
Industrial | 30% | 35% | 33% |
Medical | 16% | 12% | 12% |
Other** | 7% | 8% | 14% |
*Market classifications involve our attempt to classify distribution sales which are recognized upon shipment. Market classification is estimated based upon point-of-sales information provided to us by our distributors.
**Other includes government, telecom, homeland security and those sales through distribution which are not considered material for tracking by market application by our distributors.
Geographic diversification for current, sequential and comparable quarter sales:
Q1 FY12 | Q4 FY11 | Q1 FY11 | |
North America | 27% | 44% | 33% |
Europe | 26% | 16% | 22% |
Asia and the rest of the world | 47% | 40% | 45% |
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As a supplemental disclosure, we report Adjusted EBITDA.
While this is a non-GAAP measure, this is a standard metric
used by many companies to measure performance, particularly
to measure cash flow performance before interest expenses are
paid. Many financial institutions use this measure as part of
their credit evaluation process. We believe that Adjusted
EBITDA provides useful supplemental information to investors
and offers a better understanding of results of operations as
seen through the eyes of management and facilitates
comparison to results for prior periods. We have chosen to
provide this supplemental information to enable investors to
perform additional comparisons of operating results and
analyze financial performance without the impact of certain
non-cash expenses that may obscure trends in our underlying
performance. We use Adjusted EBITDA internally to make
strategic decisions, forecast future results and evaluate our
financial performance. This non-GAAP financial measure is not
in accordance with, or an alternative for, GAAP financial
measures and may differ from non-GAAP financial measures used
by other companies. The presentation of the additional
information should not be considered a substitute for net
income (loss) in accordance with GAAP. Reconciliations of
reported net income (loss) to Adjusted EBITDA are included
below.
RF Monolithics, Inc., headquartered in Dallas, Texas, is a provider of solutions-driven, technology-enabled wireless connectivity for a broad range of wireless applications- from individual standard and custom components to modules for comprehensive industrial wireless sensor networks and machine-to-machine (M2M) technology. For more information on RF Monolithics, Inc., please visit the Company's website at http://www.RFM.com.
Forward-Looking Statements
This news release contains forward-looking statements, made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Statements of the plans, objectives, expectations and intentions of RFM and/or its wholly-owned subsidiaries (collectively, the "Company" or "we") involve risks and uncertainties. Statements containing terms such as "believe", "expect", "plan", "anticipate", "may" or similar terms are considered to contain
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uncertainty and are forward-looking statements. Such statements are based on information available to management as of the time of such statements and relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our mission and vision, and future financial and operating results. Such statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, including risks related to economic conditions as related to our customer base, collection of receivables from customers who may be affected by economic conditions, the highly competitive market in which we operate, rapid changes in technologies that may displace products sold by us, declining prices of products, our reliance on distributors, delays in product development efforts, uncertainty in consumer acceptance of our products, changes in our level of sales or profitability, manufacturing and sourcing risks, availability of materials, cost of components for our products, product defects and returns, as well as the other risks detailed from time to time in our SEC reports, including the report on Form 10-K for the year ended August 31, 2011. We do not assume any obligation to update any information contained in this release.
Management Conference Call:RFM will host a conference call, open to the public, today at 5:00 p.m. ET. The public will have the opportunity to listen to the conference call over the Internet or by dialing toll-free 1-877-390-5532. Ask to be connected to the RF Monolithics management conference call. Please call 10 minutes prior to scheduled start time. After the conference call, a replay will be available and can be accessed by dialing 1-800-642-1687 (pass code 40633690). This replay will be available through January 17, 2012.
Internet Access:
To access the conference call via the web, participants
should access RFM's website at www.rfm.com and click on
Investor Relations page. Please log in at least 10 minutes
prior to the call to ensure web browser compatibility.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In Thousands, Except Per-Share Amounts)
Three Months Ended
November 30,
SALES | 2011 | 2010 |
SALES | $ 8,398 | $ 8,512 |
COST OF SALES | 5,751 | 5,503 |
GROSS PROFIT | 2,647 | 3,009 |
OPERATING EXPENSES: Research and development | 692 | 898 |
Sales and marketing | 1,250 | 1,189 |
General and administrative | 538 | 694 |
Total operating expenses | 2,480 | 2,781 |
S
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RF MONOLITHICS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(In Thousands)
November 30, August 31, ASSETS 20112011 (a)
CURRENT ASSETS:
Cash | $ 556 | $ 700 |
Trade receivables - net | 6,127 | 5,526 |
Inventories - net | 5,570 | 5,594 |
Prepaid expenses and other | 299 | 326 |
Total current assets | 12,552 | 12,146 |
PROPERTY AND EQUIPMENT - Net | 1,128 | 1,138 |
GOODWILL | 556 | 556 |
INTANGIBLES | 369 | 369 |
OTHER ASSETS - Net | 163 | 205 |
TOTAL | $ 14,768 | $ 14,414 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
CURRENT LIABILITIES: Current portion of long term debt | $ 60 | $ 60 |
Capital lease obligations - current portion | 16 | 16 |
Accounts payable - trade | 2,582 | 2,852 |
Accrued expenses and other current liabilities | 1,019 | 1,043 |
Total current liabilities | 3,677 | 3,971 |
LONG-TERM DEBT - Less current portion: Long term debt | 2,885 | 2,400 |
Capital lease obligations | 15 | 19 |
Total long-term debt | 2,900 | 2,419 |
DEFERRED TAX LIABILITIES | 125 | 125 |
Total liabilities | 6,702 | 6,515 |
STOCKHOLDERS' EQUITY: Common stock: 10,978 and 10,939 shares issued | 11 | 11 |
Additional paid-in capital | 52,054 | 51,963 |
Accumulated deficit | (43,999) | (44,075) |
Total stockholders' equity | 8,066 | 7,899 |
TOTAL | $ 14,768 | $ 14,414 |
(a) Derived from audited financial statements. |
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Adjusted EBITDA
The following table sets forth, for the three months ended November 30, 2011 and 2010, the calculation for Adjusted EBITDA that is referred to in this report (in thousands):
Three Months Ended November 30,2011 | 2010 | ||
Net income | $ 76 | $ 160 | |
Add back: Interest expense | 68 | 72 | |
Taxes | 11 | 9 | |
Depreciation | 115 | 164 | |
Amortization: Patents | 34 | 50 | |
Stock compensation | 90 | 95 | |
Total amortization | 124 | 145 | |
Adjusted EBITDA | $ 394 | $ 550 |
Adjusted EBITDA is an important liquidity measurement used by financial institutions to measure a company's capability to fund operations. Adjusted EBITDA is also used by our management to measure our performance in achieving necessary cost reductions.
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