UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-23818
MERIX CORPORATION
(Exact name of registrant as specified in its charter)
OREGON 93-1135197
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1521 Poplar Lane, Forest Grove, Oregon 97116
(Address of principal executive offices) (Zip Code)
(503) 359-9300
(Registrant's telephone number)
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 the filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the Registrant's Common Stock outstanding as of December
31, 1997 was 6,193,210 shares.
<PAGE>
MERIX CORPORATION
FORM 10-Q
TABLE OF CONTENTS
Part I Financial Information Page
Item 1. Financial Statements:
Condensed Balance Sheets as of November 29, 1997 and 2
May 31, 1997
Condensed Statements of Income for the three months and six 3
months ended November 29, 1997 and November 30, 1996
Condensed Statements of Cash Flows for the six months 4
ended November 29, 1997 and November 30, 1996
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
<PAGE>
PART I. FINANCIAL INFORMATION
MERIX CORPORATION
CONDENSED BALANCE SHEETS
(unaudited, in thousands)
November 29, May 31,
1997 1997
------------ -------
Assets
Cash and short-term investments $ 24,434 $ 25,097
Accounts receivable, net of $309 and $322 25,755 24,157
Inventories (Note 2) 9,898 8,642
Tax refund receivable -- 2,308
Deferred income taxes 2,496 1,410
Other current assets 1,551 1,817
-------- --------
Total current assets 64,134 63,431
Property, plant and equipment, net (Note 3) 64,722 63,398
Goodwill, net 2,109 2,292
Other assets 2,490 1,328
-------- --------
Total assets $133,455 $130,449
======== ========
Liabilities and Shareholders' Equity
Accounts payable $ 9,066 $ 10,011
Accrued compensation 3,295 3,084
Current portion of long-term debt 2,260 2,260
Other accrued liabilities 4,890 2,490
-------- --------
Total current liabilities 19,511 17,845
Long-term debt 42,329 42,390
Deferred income taxes 2,844 1,525
Other liabilities 1,273 1,273
-------- --------
Total liabilities 65,957 63,033
Shareholders' equity 67,498 67,416
-------- --------
Total liabilities and shareholders' equity $133,455 $130,449
======== ========
The accompanying notes are an integral part of the condensed financial
statements.
2
<PAGE>
<TABLE>
<CAPTION>
MERIX CORPORATION
CONDENSED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
Three months ended Six months ended
Nov. 29, Nov. 30, Nov. 29, Nov. 30,
1997 1996 1997 1996
---------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 46,571 $ 35,841 $ 91,130 $ 76,957
Cost of sales 40,102 30,755 78,899 64,519
-------- -------- -------- --------
Gross profit 6,469 5,086 12,231 12,438
-------- -------- -------- --------
Engineering 1,448 1,544 2,979 3,194
Selling, general and administrative 3,543 3,319 6,883 6,751
Restructuring expense (Note 5) 1,878 -- 1,878 --
-------- -------- -------- --------
Total operating expense 6,869 4,863 11,740 9,945
Operating income (loss) (400) 223 491 2,493
Interest and other expense, net (622) (457) (1,109) (701)
-------- -------- -------- --------
Income (loss) before taxes (1,022) (234) (618) 1,792
Income taxes (381) (91) (270) 679
-------- -------- -------- --------
Net income (loss) $ (641) $ (143) $ (348) $ 1,113
======== ======== ======== ========
Net income (loss) per share $ (0.10) $ (0.02) $ (0.06) $ 0.18
======== ======== ======== ========
Shares used in per share calculations 6,191 6,298 6,248 6,309
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
MERIX CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Six Months Ended
November 29, November 30,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (348) $ 1,113
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 5,008 4,225
Deferred income taxes 360 668
Amortization of unearned compensation 145 217
Non-cash effect of restructuring charge 1,149 --
Other (58) 85
Changes in assets and liabilities:
Accounts receivable (1,598) 2,966
Inventories (1,256) (403)
Tax refund receivable 2,308 --
Other current assets 266 (806)
Accounts payable (945) (1,917)
Accrued compensation 211 (1,977)
Other accrued liabilities 1,300 421
-------- --------
Net cash provided by operating activities 6,542 4,592
-------- --------
Cash flows from investing activities:
Capital expenditures (7,345) (9,646)
Short-term investments: purchases (9,500) (12,110)
maturities 7,587 6,353
Proceeds from sale of assets 20 65
-------- --------
Net cash used in investing activities (9,238) (15,338)
-------- --------
Cash flows from financing activities:
Long-term debt: proceeds -- 40,000
principal payments (61) (21,900)
Proceeds from exercise of stock options 362 36
Common stock surrendered in connection with
restricted stock awards (181) --
Deferred financing costs -- (382)
-------- --------
Net cash provided by financing activities 120 17,754
-------- --------
Increase (decrease) in cash and cash equivalents (2,576) 7,008
Cash and cash equivalents at beginning of period 16,537 12,191
-------- --------
Cash and cash equivalents at end of period 13,961 19,199
Short-term investments 10,473 12,924
-------- --------
Cash and short-term investments at end of period $ 24,434 $ 32,123
======== ========
Supplemental disclosure of non-cash information:
Tax benefit related to stock-based compensation $ 127 $ 152
Asset acquired by recognition of liability 1,100 --
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,619 $ 651
Cash paid for income taxes -- 8
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements.
4
<PAGE>
MERIX CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
Note 1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
pursuant to Securities and Exchange Commission rules and regulations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company's annual report on Form 10-K for the
fiscal year ended May 31, 1997.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results for interim periods. The
results of operations for the three and six months ended November 29, 1997 are
not necessarily indicative of the results to be expected for the full fiscal
year.
Note 2. INVENTORIES
November 29, May 31,
1997 1997
----------------- -----------------
Raw materials $ 4,201 $ 2,506
Work in process 4,145 4,790
Finished goods 1,552 1,346
----------- ------------
Total $ 9,898 $ 8,642
=========== ============
Note 3. PROPERTY, PLANT AND EQUIPMENT
November 29, May 31,
1997 1997
----------------- ----------------
Land $ 2,190 $ 2,190
Buildings and grounds 23,685 23,618
Machinery and equipment 95,987 90,219
------------- -------------
Total 121,862 116,027
Less accumulated depreciation (57,140) (52,629)
------------- -------------
Property, plant and equipment, net $ 64,722 $ 63,398
============= =============
Note 4. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS
128). SFAS 128 changes the standards for computing and presenting earnings per
share (EPS) and supersedes Accounting Principles Board Opinion No. 15, "Earnings
per Share." SFAS 128 simplifies the standards for computing earnings per share
and makes them comparable to international EPS standards. It replaces the
presentation of primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures and requires a reconciliation
of the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. This Statement
requires restatement of all prior-period EPS data presented.
5
<PAGE>
Following is the pro forma effect of adoption of SFAS 128 on the Company's
earnings per share for the three months ended November 29, 1997 and November 30,
1996:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Nov. 29, Nov. 30, Nov. 29, Nov. 30,
1997 1996 1997 1996
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary EPS as
reported $(0.10) $(0.02) $(0.06) $0.18
Effect of SFAS 128 0.00 0.00 0.00 0.00
------ ------ ------ -----
Basic EPS as restated $(0.10) $(0.02) $(0.06) $0.18
====== ====== ====== =====
Fully diluted EPS $(0.10) $(0.02) $(0.06) $0.18
Effect of SFAS 128 0.00 0.00 0.00 0.00
------ ------ ------ -----
Diluted EPS as restated $(0.10) $(0.02) $(0.06) $0.18
====== ====== ====== =====
</TABLE>
Note 5. RESTRUCTURING
Results of operations for the second quarter of fiscal 1998 included a $1,878
charge for the costs associated with a restructuring plan undertaken to improve
the Company's profitability. The restructuring plan consisted of a work force
reduction in the support and administrative functions, the write-down of certain
manufacturing equipment, and other miscellaneous costs. The charge for the work
force reduction of approximately $700 included the reduction of 85 positions in
the Company's support and administrative functions, including purchasing,
materials, administration and computer automated tooling. No direct
manufacturing jobs were eliminated. In connection with the restructuring plan,
the Company analyzed its manufacturing equipment and based on that analysis,
recorded a charge for the write-off of approximately $1,100 of manufacturing
equipment located primarily at the Company's Loveland, Colorado facility. The
Company based its analysis of the manufacturing equipment on Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and For Long-Lived Assets To Be Disposed Of" which establishes
standards to identify and measure impairment of long-lived assets. Of the total
$1,878 restructuring charge, $410 was included in current liabilities at
November 29, 1997.
Note 6. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" which establishes requirements for
disclosure of comprehensive income and is effective for the Company's fiscal
year ending May 1999. Reclassification of earlier financial statements for
comparative purposes is required.
In June 1997, the FASB issued Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" (SFAS
131), which redefines how operating segments are determined and requires
disclosure of certain financial and descriptive information about operating
segments, and is effective for the Company's fiscal year ending May 1999. For
purposes of SFAS 131, the Company has not yet completed an analysis of its
operating segments.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Dollars in thousands, except per share amounts)
This discussion and analysis is designed to be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth in the Merix Corporation (the Company) Form 10-K for the
fiscal year ended May 31, 1997.
Results of Operations
Fiscal year. The Company's fiscal year is the 52 or 53 week period ending the
last Saturday in May. Fiscal year 1998 is a 52-week year and fiscal year 1997
was a 53-week year, with the extra week occurring in the first quarter.
Net Sales. Net sales for the second quarter of fiscal 1998 were $46,571, an
increase of 30% over net sales of $35,841 in the second quarter of fiscal 1997.
Net sales for the first six months of fiscal 1998 were $91,130, an increase of
18% over net sales of $76,957 in the first six months of fiscal 1997. Although
sales to individual customers vary from quarter to quarter, taken as a whole,
sales to the Company's five largest customers have remained relatively constant
as a percent of total sales.
As shown in the table below, the Company's five largest customers comprised 73%
and 72% of net sales in the three and six months ended in November 1997,
respectively, compared with 78% and 75% in the three and six months ended in
November 1996, respectively. One of the Company's objectives is to diversify its
customer base in order to grow sales and reduce the risks associated with a
concentration of sales to a relatively small number of customers. The Company is
taking actions to increase sales by broadening its customer base and enhancing
its product mix by targeting higher complexity products, but, to date, the
success of these actions has been limited by a shortage of available
manufacturing capacity. Manufacturing constraints have continued to limit the
capacity available to meet the production needs of both current and new
customers. The Company is currently taking actions to ease the manufacturing
constraints, including addition of equipment in the constraint areas, more
efficient utilization of capacity in its Loveland, Colorado facility, and
modification of work shifts.
In December 1997, the Company announced plans for a major expansion of its
Forest Grove manufacturing capacity, which is expected to cost approximately $21
million. Approximately $6.5 million of this amount is budgeted for the retrofit
of existing manufacturing facilities and the remainder for the purchase and
installation of new manufacturing equipment. The expansion is expected to be
completed in the first half of fiscal 1999. While the Company expects that this
increased capacity will allow it to accept volume production orders from new
customers, it also expects that a relatively small number of customers will
continue to account for a substantial portion of its sales.
The Company's 90 day backlog was approximately $32.7 million at November 29,
1997, compared to $26.4 million at May 31, 1997. Orders from the Company's five
largest customers comprised approximately 71% of the backlog at the end of the
second quarter of fiscal 1998. A substantial portion of the Company's backlog is
typically scheduled for delivery within 60 days. A certain portion of the
Company's backlog is subject to cancellation or postponement without significant
penalty. Accordingly, the Company's backlog is not necessarily indicative of
future sales or earnings. Cancellation and postponement charges generally vary
depending upon the time of cancellation or postponement.
There can be no assurance that the Company's principal customers will continue
to purchase products and services from the Company at current levels, that the
mix or volume of products purchased will be in the same ratio or that actions to
increase capacity, broaden its customer base, increase sales to new and existing
customers and enhance its product mix will be successful. The loss of one or
more principal customers, a change in the mix of product sales, or delays in the
completion of the expansion project could have a material adverse effect on the
Company's business, financial condition and results of operations.
8
<PAGE>
Sales by market segments and major customers as a percent of net sales were as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------------- ---------------------------------
Nov. 29, 1997 Nov. 30, 1996 Nov. 29, 1997 Nov. 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Segments
Computers 29% $13,473 28% $ 9,915 28% $25,377 28% $21,707
Communications 13 6,019 19 6,966 15 13,359 22 17,026
Test and Instruments 36 16,880 36 12,995 35 32,211 34 25,641
Contract Mfg. 20 9,383 15 5,352 19 17,455 14 10,982
0ther 2 816 2 613 3 2,728 2 1,601
------------- ------------- ------------- -------------
Total 100% $46,571 100% $35,841 100% $91,130 100% $76,957
------------- ------------- ------------- -------------
Largest Customers
Hewlett-Packard Company 25% $11,612 32% $11,397 25% $22,830 27% $20,562
Tektronix, Inc. 17 7,890 20 7,237 17 15,135 20 15,203
Motorola, Inc. 8 3,695 12 4,346 9 8,383 15 11,830
Teradyne, Inc. 14 6,649 7 2,348 13 11,986 6 4,450
Storage Technology Corporation 9 4,066 7 2,333 8 7,482 7 5,460
Others 27 12,659 22 8,180 28 25,314 25 19,452
------------- ------------- ------------- -------------
Total 100% $46,571 100% $35,841 100% $91,130 100% $76,957
------------- ------------- ------------- -------------
</TABLE>
Gross Margins. The Company's gross margin was 13.9% and 13.4% in the three and
six months ended in November 1997, respectively, compared with 14.2% and 16.2%
in the three and six months ended in November 1996, respectively. The Company's
gross margins can be affected by various factors, including sales volumes,
product mix, production yields, price changes and changes in the Company's cost
structure. The product mix in the second quarter and first six months of fiscal
1998 included a greater proportion of lower margin products than in the second
quarter and first six months of fiscal 1997. In addition, due to manufacturing
capacity constraints, certain manufacturing processes were performed by
subcontractors, which reduced gross margins in the second quarter and first six
months of fiscal 1998.
In order to improve profitability, the Company continues to focus on sales of
higher complexity products which generally have higher prices and gross margins.
The Company has also taken actions to lessen the need for subcontracting
services, to reduce its costs and to add capacity. The Company has added
equipment in the manufacturing constraint areas, modified work shifts and more
efficiently utilized the capacity in its Loveland, Colorado facility. On October
30, 1997, the Company announced the reduction of certain positions in the
support and administrative functions, including purchasing, materials and
computer automated tooling. In December 1997, the Company announced plans for a
major expansion of its Forest Grove manufacturing capacity. However, there can
be no assurance that these efforts will result in higher sales or profits.
Restructuring Expense. Results of operations for the second quarter of fiscal
1998 included a $1,878 charge for the costs associated with a restructuring plan
undertaken to improve the Company's profitability. Without the effect of the
restructuring charge, operating income for the second quarter of fiscal 1998 was
$1,478, and net income was $537 or $0.09 per share. The restructuring plan
consisted of a work force reduction in the support and administrative functions,
the write-down of certain manufacturing equipment, and other miscellaneous
costs. The charge for the work force reduction of approximately $700 included
the reduction of 85 positions in the Company's support and administrative
functions, including purchasing, materials, administration and computer
automated tooling. No direct manufacturing jobs were eliminated. The Company
believes that the work force reduction will result in pre-tax savings of
approximately $1,200 per quarter, beginning with the third quarter of fiscal
1998. In connection with the restructuring plan, the Company analyzed its
manufacturing equipment and based on that analysis, recorded a charge for the
write-off of approximately $1,100 of manufacturing equipment located primarily
at the Company's Loveland, Colorado facility. The Company based its analysis of
the manufacturing equipment on Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and For
8
<PAGE>
Long-Lived Assets To Be Disposed Of" which establishes standards to identify and
measure impairment of long-lived assets. Of the total $1,878 restructuring
charge, $410 was included in current liabilities at November 29, 1997.
Engineering. Engineering expenses were $1,448 and $1,544 in the second quarters
of fiscal 1998 and 1997, respectively, and were 3.1% and 4.3% of sales,
respectively. Engineering expenses were $2,979 and $3,194 in the first six
months of fiscal 1998 and 1997, respectively, and were 3.3% and 4.2% of sales,
respectively. Engineering expenses have decreased primarily due to a reduction
in the number of engineering employees.
Selling, General and Administrative. Selling, general and administrative
expenses were $3,543 and $3,319 in the second quarters of fiscal 1998 and 1997,
respectively, and were 7.6% and 9.3% of sales, respectively. Selling, general
and administrative expenses were $6,883 and $6,751 in the first six months of
fiscal 1998 and 1997, respectively, and were 7.6% and 8.8% of sales,
respectively. Selling, general and administrative expenses have increased
principally as a result of increased sales and marketing activities, including
the reorganization and relocation of the Company's sales force.
Interest and Other Expense, net. Interest and other expense, net was $622 and
$457 for the second quarters of fiscal 1998 and 1997, respectively, and $1,109
and $701 for the first six months of fiscal 1998 and 1997, respectively. The
increases in fiscal 1998 primarily resulted from the issuance of $40 million in
senior notes in September 1996.
Income Taxes. In the first six months of fiscal 1998, the Company recorded a
benefit of $270, which it believes will be realized within the fiscal year. The
Company estimates that its effective income tax rate for fiscal 1998 will be
approximately 37%.
Liquidity and Capital Resources
Cash and short-term investments at November 29, 1997 were $24,434 compared with
$25,097 at May 31, 1997. Working capital was $44,623 at November 29, 1997
compared with $45,586 at May 31, 1997.
Cash provided by operating activities in the first six months of fiscal 1998 was
$6,542, which primarily consisted of a net loss adjusted for depreciation and
amortization, the restructuring charge, collection of a tax refund, and
increases in accounts receivable and inventories.
Cash used in investing activities in the first six months of fiscal 1998 was
$9,238, consisting of $7,345 in capital expenditures for manufacturing
equipment, $9,500 of purchases of short-term investments, and $7,587 of
maturities of short-term investments. The Company's policy is to hold such
short-term investments to maturity.
The Company has $40 million outstanding under a private placement of senior
unsecured notes with two insurance companies. The notes bear interest at 7.92%,
payable on a semi-annual basis, with payment of principal in five equal annual
installments commencing on September 15, 1999.
The Company has an unsecured $30 million bank line of credit against which it
had no borrowings at November 29, 1997. Borrowings under this line of credit
would bear interest at the agent's prime or alternative LIBOR based rates
available at the time of borrowing rate (6.91% at November 29, 1997). The line
of credit matures on September 30, 1998.
The senior unsecured notes and the line of credit include certain financial
covenants (including minimum net worth, debt ratio, quick ratio and interest
coverage requirements) and cross-default provisions. As of November 29, 1997,
the Company was in compliance with all covenants.
9
<PAGE>
The Company had capital commitments of approximately $4.7 million at November
29, 1997, related to expansion of manufacturing capacity. Additionally, in
December 1997 the Company announced plans for a major expansion of its Forest
Grove manufacturing capacity, which is expected to cost approximately $21
million and is scheduled for completion in the first half of fiscal 1999. The
Company is considering various alternatives to finance the expansion, including
available cash, leases and short-term or long-term debt.
The Company believes that its existing capital resources and cash generated from
operations will be sufficient to meet its working capital and capital
expenditure requirements (other than the capacity expansion) for the next twelve
months.
Forward-looking Statements
Information set forth in this Quarterly Report on Form 10-Q relating to the
remainder of fiscal year 1998, including Company goals with respect to cost
savings, customer diversification, orders from new customers, changes in product
mix and increases in manufacturing capacity constitute forward-looking
statements. Information contained in forward-looking statements is based on
current expectations and is subject to change and may differ materially from
actual results.
From time to time, information provided by the Company or statements made by its
employees may contain other forward-looking information that involves a number
of risks and uncertainties. Factors that could cause actual results to differ
materially from the forward-looking information include, but are not limited to,
the matters discussed in this Form 10-Q as well as the following: customer
demand, risks of business conditions and growth in the general economy and the
interconnect industry; delays in the completion of the expansion project;
unrealized cost savings; capacity constraints; production delays; product mix;
the highly competitive interconnect environment; the ability to attract new
customers; cancellation or reduction of orders; pricing pressures, including
those that may result from current economic pressures in the Asian markets;
effective utilization of manufacturing resources; customer acceptance of new
technologies; costs and yield issues associated with production; the ability to
attract and retain a talented workforce; and other risks listed from time to
time in the Company's Securities and Exchange Commission reports or otherwise
disclosed by the Company. Any forward-looking statements should be considered in
light of these factors.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of shareholders was held on September 23, 1997. The
following matters were submitted to shareholders for their consideration:
1. With respect to the six nominees for director identified in the Company's
Proxy Statement:
Votes For Votes
Withheld
Charles M. Boesenberg 5,498,218 421,377
Deborah A. Coleman 5,480,993 438,602
Carlene M. Ellis 5,497,918 421,677
John P. Karalis 5,498,218 421,377
Carl W. Neun 5,497,893 421,702
Dr. Koichi Nishimura 5,498,218 421,377
2. The amendments to the 1994 Stock Incentive Plan were approved as follows:
3,368,853 shares were voted in favor, 1,361,163 shares were voted in
opposition, 26,489 shares abstained and there were 1,163,090 broker
non-votes.
3. The appointment of Deloitte & Touche LLP as the Company's independent auditor
for fiscal year 1998 was ratified as follows: 5,902,445 shares were voted in
favor, 7,475 shares were voted in opposition, 9,675 shares abstained and
there were no broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed as part of this report are listed below:
Exhibit
No.
10.34 Third Amendment to Note Purchase Agreement dated November
28, 1997
10.35 Indemnity Agreement between Merix Corporation and William C.
McCormick as of October 21, 1997*
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
* This Exhibit constitutes a management contract or compensatory plan or
arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended November 29,
1997.
11
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized this 9th day of January, 1998.
MERIX CORPORATION
By:/s/ JOSEPH H. HOWELL
----------------------------------------------
Joseph H. Howell
Senior Vice President and Chief Financial
Officer
(Principal Financial Officer)
12
================================================================================
MERIX CORPORATION
----------------------------------
THIRD AMENDMENT
Dated as of November 28, 1997
to
Note Purchase Agreements
dated September 10, 1996
----------------------------------
Re: $40,000,000 7.92% Senior Notes
due September 15, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1
<PAGE>
THIRD AMENDMENT TO NOTE PURCHASE AGREEMENTS
THIS THIRD AMENDMENT dated as of November 28, 1997 (the or this "Third
Amendment") to the Note Purchase Agreements, each dated September 10, 1996, as
amended by the First Amendment to Note Purchase Agreements dated May 28, 1997
and the Second Amendment to Note Purchase Agreements dated August 29, 1997, is
between MERIX CORPORATION, an Oregon corporation (the "Company"), and each of
the institutions which is a signatory to this Third Amendment (collectively, the
"Noteholders").
RECITALS:
A. The Company and each of the Noteholders have heretofore entered into
separate and several Note Purchase Agreements each dated September 10, 1996, as
amended by the First Amendment to Note Purchase Agreements dated May 28, 1997,
and the Second Amendment to Note Purchase Agreements dated August 29, 1997
(collectively, the "Note Purchase Agreements"). The Company has heretofore
issued the $40,000,000 7.92% Senior Notes Due September 15, 2003 (the "Notes")
dated September 10, 1996 pursuant to the Note Purchase Agreements. The
Noteholders are the holders of 100% of the outstanding principal amount of the
Notes.
B. The Company and the Noteholders now desire to amend the Note Purchase
Agreements in the respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Purchase Agreements unless herein defined or the
context shall otherwise require.
D. All requirements of law have been fully complied with and all other acts
and things necessary to make this Third Amendment a valid, legal and binding
instrument according to its terms for the purposes herein expressed have been
done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the conditions
precedent to the effectiveness of this Third Amendment set forth in Section 3.1
hereof, and in consideration of good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Company and the Noteholders do
hereby agree as follows:
SECTION 1. AMENDMENT
1.1. Section 10.4 of the Note Purchase Agreements shall be and is hereby
amended in its entirety to read as follows:
2
<PAGE>
"10.4. Interest Charges Coverage Ratio
(a) The Company will not permit the ratio, as of the
end of the fiscal quarter of the Company ended November 29,
1997, of (i) Consolidated Income Available for Interest
Charges for the fiscal quarter then ended to (ii) Interest
Charges for such fiscal quarter, to be less than 1.60 to
1.00.
(b) The Company will not permit the ratio, as of the
end of the fiscal quarter of the Company ended February 28,
1998, of (i) Consolidated Income Available for Interest
Charges for the period of the four consecutive fiscal
quarters then ended to (ii) Interest Charges for the period
of the four consecutive fiscal quarters then ended, to be
less than 1.90 to 1.00.
(c) The Company will not permit the ratio, as of the
end of any fiscal quarter of the Company ended after
February 28, 1998, of (i) Consolidated Income Available for
Interest Charges for the period of the four consecutive
fiscal quarters then ended to (ii) Interest Charges for the
period of the four consecutive fiscal quarters then ended,
to be less than 2.00 to 1.00.
(d) For purposes of all calculations under this Section
10.4, the restructuring charge determined in accordance with
GAAP of not more than $1,900,000 in the fiscal quarter ended
November 29, 1997 shall be disregarded."
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
2.1. To induce the Noteholders to execute and deliver this Third Amendment
(which representations shall survive the execution and delivery of this Third
Amendment), the Company represents and warrants to the Noteholders that:
(a) this Third Amendment has been duly authorized, executed and
delivered by the Company and this Third Amendment, the Note Purchase
Agreements, as amended by this Third Amendment, and the Notes, constitute
the legal, valid and binding obligations of the Company enforceable against
it in accordance with their respective terms, except as such enforceability
may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law);
(b) the execution, delivery and performance by the Company of this
Third Amendment (i) has been duly authorized by all necessary corporate
action on the part of the Company, (ii) does not require the consent,
approval or authorization of, or registration, filing or declaration with,
or other action by, any Governmental Authority or any other Person and
(iii) will not (A) contravene, result in any breach of, constitute a
default under, result in the creation of any Lien in respect of any
property of the Company under, or give any other Person the right to
require the Company to purchase or repay any Debt under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to which
the Company is bound or by which the Company or any of its properties may
be bound or affected, (B) conflict with or result in any breach of any of
the terms, conditions or provisions of any order, judgment, decree or
ruling of any court, arbitrator or Governmental Authority applicable to the
Company or (C) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company;
3
<PAGE>
(d) as of the date hereof and after giving effect to this Third
Amendment, (i) no Default or Event of Default has occurred and is
continuing and (ii) no event has occurred and no condition exists which has
had a Material Adverse Effect; and
(e) all the representations and warranties contained in Section 5 of
the Note Purchase Agreements are true and correct in all material respects
with the same force and effect as if made by the Company on and as of the
date hereof.
SECTION 3. CONDITION TO EFFECTIVENESS OF THIS THIRD AMENDMENT; DELIVERY OF
BOARD RESOLUTIONS.
3.1. This Third Amendment shall become effective and binding upon the
Company and the Noteholders at such time as executed counterparts of this Third
Amendment, duly executed by the Company and the Noteholders, shall have been
delivered to the Noteholders.
SECTION 4. PAYMENT OF NOTEHOLDERS' COUNSEL FEES AND EXPENSES.
4.1. The Company agrees to pay upon demand, the reasonable fees and
expenses of Choate, Hall & Stewart, special counsel to the Noteholders, in
connection with the negotiation, preparation, approval, execution and delivery
of this Third Amendment.
SECTION 5. MISCELLANEOUS.
5.1. This Third Amendment shall be construed in connection with and as part
of each of the Note Purchase Agreements, and except as modified and expressly
amended by this Third Amendment, all terms, conditions and covenants contained
in the Note Purchase Agreements and the Notes are hereby ratified and shall be
and remain in full force and effect. This Third Amendment embodies the entire
agreement and understanding between the Company and the Noteholders and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
5.2. Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this Third Amendment
may refer to the Note Purchase Agreements without making specific reference to
this Third Amendment but nevertheless all such references shall include this
Third Amendment unless the context otherwise requires. This Third Amendment is
an Operative Document. The headings in this Third Amendment are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof. The
execution hereof by you shall constitute a contract between us for the uses and
purposes hereinabove set forth, and this Third Amendment may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
5.3. This Third Amendment shall be governed by and construed in accordance
with, and the rights of the parties shall be governed by, the law of The
Commonwealth of Massachusetts excluding choice-of-law principles of the law of
such jurisdiction that would require the application of the law of a
jurisdiction other than such jurisdiction.
[The remainder of this page is left blank intentionally.]
4
<PAGE>
If you are in agreement with the foregoing, please sign the accompanying
counterpart of this Third Amendment and return it to the Company, whereupon the
foregoing shall become a binding agreement between you and the Company.
MERIX CORPORATION
By: /s/ JOSEPH H. HOWELL
------------------------------------------
Its Sr. VP & CFO
By: /s/ JANIE S. BROWN
------------------------------------------
Its VP, Corporate Controller & Treasurer
By: /s/ SAMUEL R. DESIMONE, JR.
------------------------------------------
Its VP Corporate Development &
Secretary
Accepted and Agreed to:
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: /s/ D. DANA DONOVAN
--------------------------------
Its Senior Investment Officer
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By: /s/ D. DANA DONOVAN
--------------------------------
Its Authorized Officer
5
<PAGE>
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ RICHARD C. MORRISON
--------------------------------
Its Managing Director
CM LIFE INSURANCE COMPANY
By: /s/ RICHARD C. MORRISON
--------------------------------
Its Authorized Officer
INDEMNITY AGREEMENT
This Agreement is made as of October 21, 1997, by and between Merix
Corporation, an Oregon corporation (the "Corporation"), and William C. McCormick
("Indemnitee"), a director and/or officer of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as
directors and officers of the Corporation and its subsidiaries the most capable
persons available; and
WHEREAS, corporate litigation subjects directors and officers to
expensive litigation risks at the same time that adequate coverage of directors'
and officers' liability insurance may be unavailable; and
WHEREAS, the Articles of Incorporation of the Corporation require
indemnification of the officers and directors of the Corporation to the fullest
extent permitted by law. The Articles and the Oregon Business Corporation Act
(the "Act") expressly provide that the indemnification provisions set forth in
the Act are not exclusive, and thereby contemplate that contracts may be entered
into between the Corporation and members of the Board of Directors and officers
with respect to indemnification of directors and officers; and
WHEREAS, Indemnitee does not regard the protection available under the
Corporation's Articles of Incorporation, Bylaws and insurance adequate in the
present circumstances, and may not be willing to serve as a director or officer
without adequate protection, and the Corporation desires Indemnitee to serve in
such capacity.
NOW THEREFORE, the Corporation and Indemnitee agree as follows:
1. Agreement to Serve. Indemnitee agrees to serve or continue to serve as a
director and/or officer of the Corporation and/or one or more of its
subsidiaries for so long as Indemnitee is duly elected or appointed or until
such time as Indemnitee tenders a resignation in writing.
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any threatened, pending or
completed action, suit or proceeding, whether brought in the right of the
Corporation or otherwise, whether of a civil, criminal, administrative or
investigative nature, and whether formal or informal, in which Indemnitee may be
or may have been involved as a party or otherwise, by reason of the fact that
Indemnitee is or was a director and/or officer of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, whether or not serving in such capacity at the time any liability or
expense is incurred for which indemnification or reimbursement can be provided
under this Agreement.
(b) The term "Expenses" includes, without limitation thereto, expense
of investigations, judicial or administrative proceedings or appeals, amounts
paid in settlement by Indemnitee, attorneys' fees and disbursements and any
expenses of establishing a right to indemnification under Section 7 of this
Agreement, but shall not include the amount of judgments or fines against
Indemnitee.
(c) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise tax assessed with respect
to any employee benefit plan; references to "serving at the request of the
corporation" shall include any service as a director, officer, employee or agent
of the Corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a
<PAGE>
person who acted in good faith and in a manner reasonably believed to be in the
interest of an employee benefit plan shall be deemed to have acted in a manner
"not opposed to the best interests of the Corporation" as referred to in this
Agreement.
1
<PAGE>
3. Indemnity in Third Party Proceedings. The Corporation shall indemnify
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is
a party to or threatened to be made a party to any Proceeding (other than a
Proceeding by or in the right of the Corporation to procure a judgment in its
favor) against all Expenses, judgments and fines actually and reasonably
incurred by Indemnitee in connection with such Proceeding, but only if
Indemnitee acted in good faith and in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation and,
in the case of a criminal proceeding, in addition, had no reasonable cause to
believe that Indemnitee's conduct was unlawful. The termination of any such
Proceeding by judgment, order of court, settlement, conviction or upon a plea of
nolo contendere, or its equivalent, shall not, of itself, create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in the best interest of the Corporation, and with
respect to any criminal proceeding, that such person had reasonable cause to
believe that Indemnitee's conduct was unlawful.
Pursuant to this Agreement, the Corporation specifically will, and
hereby does, indemnify, to the fullest extent permitted by law, Indemnitee
against any and all losses, claims, damages, liabilities and expenses, joint or
several, (or actions or proceedings, whether commenced or threatened, in respect
thereof) to which Indemnitee may become subject, as a result of serving as a
director and/or officer of Merix, under the Securities Act or any other statute
or common law, including any amount paid in settlement of any litigation,
commenced or threatened, and to reimburse them for any legal or other expenses
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such losses, claims, damages, liabilities, expenses or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact regarding Merix, or the omission or alleged
omission to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
4. Indemnity in Proceedings By or In the Right of the Corporation. The
Corporation shall indemnify Indemnitee in accordance with the provisions of this
Section 4 if Indemnitee is a party to or threatened to be made a party to any
Proceeding by or in the right of the Corporation to procure a judgment in its
favor against all Expenses actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such Proceeding, but only if
Indemnitee acted in good faith and in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification for Expenses shall be made under this Section 4
in respect of any claim, issue or matter as to which such person shall have been
finally adjudged by a court to be liable for negligence or misconduct in the
performance of Indemnitee's duty to the Corporation, unless and only to the
extent that any court in which such Proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity.
5. Indemnification of Expenses of Successful Party. Notwithstanding any
other provisions of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, including the dismissal of an
action without prejudice, Indemnitee shall be indemnified against all Expenses
incurred in connection therewith.
6. Advances of Expenses. The Expenses incurred by Indemnitee pursuant to
Sections 3, 4 and 8 in any Proceeding shall be paid by the Corporation in
advance at the written request of Indemnitee, if Indemnitee shall undertake to
repay such amount to the extent that it is ultimately determined by a court that
Indemnitee is not entitled to be indemnified by the Corporation and shall
furnish the Corporation a written affirmation of the Indemnitee's good faith
belief that Indemnitee is entitled to be indemnified by the Corporation under
this Agreement. Such advances shall be made without regard to Indemnitee's
ability to repay such expenses.
7. Right of Indemnitee to Indemnification Upon Application; Procedure Upon
Application. Any indemnification or advances under Sections 3, 4, 6 or 8 shall
be made no later than 45 days after
2
<PAGE>
receipt of the written request of Indemnitee, unless a determination is made
within such 45 day period by (a) the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to such proceeding, or (b)
independent legal counsel in a written opinion (which counsel shall be appointed
if such quorum is not obtainable), that the Indemnitee has not met the relevant
standards for indemnification set forth in Section 3, 4 or 8 or an exclusion set
forth in Section 9 is applicable.
The right to indemnification or advances as provided by this Agreement
shall be enforceable by Indemnitee in any court of competent jurisdiction. The
burden of proving that indemnification or advances are not appropriate shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors or independent legal counsel) to have made a determination prior to
the commencement of such action that indemnification or advances are proper in
the circumstances because Indemnitee has met the applicable standard of conduct
nor an actual determination by the Corporation (including its Board of Directors
or independent legal counsel) that Indemnitee has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that Indemnitee has not met the applicable standard of conduct. Indemnitee's
expenses incurred in connection with successfully establishing Indemnitee's
right to indemnification or advances, in whole or in part, in any such
Proceeding shall also be indemnified by the Corporation.
8. Additional Indemnification.
(a) Notwithstanding any limitation in Sections 3 or 4, the Corporation
shall indemnify Indemnitee in accordance with the provisions of this Section
8(a) to the fullest extent permitted by law if Indemnitee is party to or
threatened to be made a party to any Proceeding (including a Proceeding by or in
the right of the Corporation to procure a judgment in its favor) involving a
claim against Indemnitee for breach of fiduciary duty by Indemnitee against all
Expenses, judgments and fines actually and reasonably incurred by Indemnitee in
connection with such Proceeding, provided that no indemnity shall be made under
this Section 8(a) on account of Indemnitee's conduct which constitutes a breach
of Indemnitee's duty of loyalty to the Corporation or its stockholders or is an
act or omission not in good faith or which involves intentional misconduct or a
knowing violation of the law or with respect to an unlawful distribution under
ORS 60.367.
(b) Notwithstanding any limitation in Sections 3, 4 or 8(a), the
Corporation shall indemnify Indemnitee if Indemnitee is a party to or threatened
to be made a party to any Proceeding (including a Proceeding by or in the right
of the Corporation to procure a judgment in its favor) against all Expenses,
judgments and fines actually and reasonably incurred by Indemnitee in connection
with such Proceeding to the fullest extent permitted by the Act, including the
nonexclusivity provision of ORS 60.414(1) and any successor provision and
including any amendments to the Act adopted after the date hereof that may
increase the extent to which a corporation may indemnify its officers and
directors.
(c) The indemnification provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under the
Restated Articles of Incorporation, the Bylaws, any other agreement, any vote of
shareholders or directors, the Act, or otherwise, both as to action in
Indemnitee's official capacity or as to action in another capacity while holding
such office. The indemnification under this Agreement shall continue as to
Indemnitee even though Indemnitee may have ceased to be a director or officer
and shall inure to the benefit of the heirs and personal representatives of
Indemnitee.
9. Exclusions. Notwithstanding any provision in this Agreement, the
Corporation shall not be obligated under this Agreement to make any
indemnification or advances in connection with any claim made against
Indemnitee:
(a) for which payment is required to be made to or on behalf of
Indemnitee under any insurance policy, except with respect to any excess beyond
the amount of required payment under such
3
<PAGE>
insurance, unless payment under such insurance policy is not made after
reasonable effort by Indemnitee to obtain payment. The Corporation shall be
subrogated with respect to any other rights of Indemnitee with respect to any
payment made by the Corporation to or on behalf of the Corporation under this
Agreement;
(b) for any transaction from which Indemnitee derived an improper
personal benefit; or
(c) for an accounting of profits made from the purchase and sale by
Indemnitee of securities of the Corporation within the meaning of Section 16(b)
of the Securities Exchange Act of 1934 and amendments thereto or similar
provisions of any state statutory law or common law.
10. Partial Indemnification. If Indemnitee is entitled under any provisions
of this Agreement to indemnification by the Corporation for some or a portion of
the Expenses, judgments and fines actually and reasonably incurred by Indemnitee
in the investigation, defense, appeal or settlement of any Proceeding but not,
however, for the total amount thereof, the Corporation shall nevertheless
indemnify Indemnitee for the portion of such Expenses, judgments or fines to
which Indemnitee is entitled.
11. Business Transactions. The Corporation agrees that it will not effect
any Business Transaction (as defined in Article XI of the Restated Articles of
Incorporation of the Corporation) which has not been approved by the Continuing
Directors (as defined in Article XI of the Restated Articles of Incorporation of
the Corporation) of the Corporation unless the other party to the transaction
agrees in writing to (a) use its best efforts to maintain for the subsequent two
year period any and all directors' and officers' liability insurance in effect
prior to any discussions or announcement relating to such Business Transaction
and (b) assume all obligations of the Corporation under this Agreement and
indemnify Indemnitee and advance litigation expenses in accordance with this
Agreement.
12. Severability. If this Agreement or any portion thereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify Indemnitee as to Expenses, judgments
and fines with respect to any Proceeding to the full extent permitted by any
applicable portion of this Agreement that shall not have been invalidated or by
any other applicable law.
13. Notice. Indemnitee shall, as a condition precedent to Indemnitee's
right to be indemnified under this Agreement, give to the Corporation notice in
writing as soon as practicable of any claim made against Indemnitee for which
indemnity will or could be sought under this Agreement. Notice to the
Corporation shall be directed to Merix Corporation, 1521 Poplar Lane, Forest
Grove, Oregon 97116, Attention: Secretary (or such other address as the
Corporation shall designate in writing to Indemnitee). Notice shall be deemed
received three days after the date postmarked if sent by prepaid mail, properly
addressed. In addition, Indemnitee shall give the Corporation such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
15. Applicable Law. This Agreement shall be governed by and construed in
accordance with Oregon law.
16. Successors and Assigns. This Agreement shall be binding upon the
Corporation and its successors and assigns.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to
be duly executed and signed as of the day and year first above written.
MERIX CORPORATION
<PAGE>
By /s/DEBORAH A. COLEMAN
-----------------------------------------
Chair, Chief Executive Officer,
and President
INDEMNITEE
/s/WILLIAM C. McCORMICK
--------------------------------------------
4
EXHIBIT 11
MERIX CORPORATION
CALCULATIONS OF NET INCOME (LOSS) PER SHARE
Three months ended Six months ended
------------------ -----------------
Nov. 29, Nov. 30, Nov. 29, Nov. 30,
------------------ -----------------
1997 1996 1997 1996
--------- ------- ------- -------
Weighted average shares outstanding
for the period 6,191 6,298 6,248 6,135
Dilutive common stock options using
the treasury stock method - - - 174
------ ------ ------ ------
Total shares used in per share
calculations 6,191 6,298 6,248 6,309
====== ====== ====== ======
Net income (loss) $ (641) $ (143) $ (348) $1,113
====== ====== ====== ======
Net income (loss) per share $(0.10) $(0.02) $(0.06) $ 0.18
====== ====== ====== ======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements in the Company's Quarterly Report on Form 10Q
for the quarter ended November 29, 1997, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> NOV-29-1997
<CASH> 13,961
<SECURITIES> 10,473
<RECEIVABLES> 26,064
<ALLOWANCES> 309
<INVENTORY> 9,898
<CURRENT-ASSETS> 64,134
<PP&E> 121,862
<DEPRECIATION> 57,140
<TOTAL-ASSETS> 133,455
<CURRENT-LIABILITIES> 19,511
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 67,498
<TOTAL-LIABILITY-AND-EQUITY> 133,455
<SALES> 91,130
<TOTAL-REVENUES> 91,130
<CGS> 78,899
<TOTAL-COSTS> 78,899
<OTHER-EXPENSES> 11,740
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (618)
<INCOME-TAX> (270)
<INCOME-CONTINUING> (348)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (348)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
