RF Monolithics Reports Fourth Quarter Results

October 27, 2009 4:01 PM EDT

15% Increase in Sales, Return to Profitability, Significant Increase in EBITDA and Continued Positive Operating Cash Flow

DALLAS--(BUSINESS WIRE)-- RF Monolithics, Inc. (NASDAQ: RFMI) today reported sales for the fourth quarter ended August 31, 2009 of $7.5 million, representing a 15% increase from $6.5 million in sales for the third quarter and a 40% decrease from $12.4 million in sales for the fourth quarter of the prior year. The Company reported net income of $62,000 or $0.01 per share, compared to a net loss for the fourth quarter ended August 31, 2008 of $19.5 million or $1.99 per share.

Sales for the fiscal year ended August 31, 2009 were $32.0 million, compared to sales for the year ended August 31, 2008 of $54.7 million. Net loss for fiscal 2009 was $3.5 million or $0.35 per share, compared to a net loss of $20.9 million or $2.17 per share for fiscal 2008. The fiscal 2009 net loss was primarily due to $2.0 million in net restructuring and impairments expenses and $0.2 million in loss from discontinued operations, as well as the effects of the economic downturn.

The prior year's fourth quarter net loss was primarily due to unusual expenses, including $16.2 million in net restructuring and impairment expenses and $3.2 million in loss from discontinued operations. The prior year's net loss was primarily due to $16.5 million in net restructuring and impairment expenses and $4.7 million in loss from discontinued operations.

"Last December, we announced a series of cost reduction and cash preservation measures in response to economic conditions that had caused a sudden drop in sales to customers in many of our markets. Since then, we have implemented these actions and taken others to improve profitability and cash flow. This quarter, we see the clear results of those measures, along with some economic recovery in our markets. The economy is still affecting us, as sales are down substantially from last year. However, we think returning to profitability, achieving EBITDA of $637,000 and positive operating cash flow of $1.3 million are important milestones in "right sizing" our company at our current level of sales. In the current quarter, we improved our gross margins 320 basis points from our second quarter ended in February and reduced quarterly operating expenses (disregarding restructuring and impairment expenses) by $1.5 million from our first quarter. The aggressive implementation of our cost reduction measures and our relentless focus on cost control by our management team and employees have positioned the Company well for the future," RFM's President and CEO David M. Kirk said.

"Our focus on Wireless Solutions products for the medical and industrial markets resulted in an overall 15% increase in sales from our previous quarter, despite further weakness in automotive and telecommunications markets. We saw improved order activity and a positive book-to-bill ratio with greater visibility due to lead times. We saw strength in our point of sales reports from our distribution network. We have launched three new products in recent months. As a result, while our markets are still facing significant challenges and there is uncertainty about the timing and strength of a recovery; we are encouraged by the trends that we are seeing and the results of our efforts, which we believe validate our business model," Kirk said.

"We have also made substantial progress in improving our liquidity and debt reduction. We generated $1.3 million in operating cash flow in the fourth quarter and reduced our debt, to our senior lender, by over $1.0 million. Total operating cash flow for fiscal 2009 was $4.2 million. Our improved operating performance and determined effort to reduce inventory has allowed us to cut our total bank debt by $4.9 million (52%) and other current liabilities by $3.9 million this year. The outstanding balance of our debt to our senior lender was reduced from $9.4 million at the end of last year to $3.6 million this year-end, and we continued to meet all of our current financial covenants. As a result, we extended our Forbearance Agreement for another six months, and at the expiration of the agreement, we expect to enter into an agreement with new financial covenants," Kirk said.

Highlights and Additional Details:

    --  Sales were up 15% from last quarter and down 40% from our fourth quarter
        of last year.
        o The majority of the sales increase came from the medical and
          industrial markets.
        o Our Wireless Solutions business remains at 56% of total sales due to
          Virtual Wire(R) sales and the strong medical market. We continue to
          benefit from our strategic focus on the Wireless Solutions business.
        o Medical market sales, mainly of our Wireless Solutions products, were
          up 35% sequentially and 31% comparatively, and represented 25% of
          total sales.
        o Industrial market sales increased 11% sequentially but remained down
          comparatively due to the slow demand for wireless modules for
          industrial surveying and telemetry which remain adversely affected by
          the decline in construction.
        o Automotive market sales decreased 7% sequentially and 56%
          comparatively. In general, automotive production remains depressed but
          we do anticipate some improvement in the next quarter based on
          production increases from the "cash for clunkers" program and other
          factors. However, increased sales to automotive markets would likely
          lower our overall gross margin percentage.
        o Our top five customers included one from each of the automotive,
          distribution, industrial, medical, and other markets. Sales to two
          customers exceeded 10% of sales for the quarter.
    --  Gross Profit at 37.4% was up 150 basis points from the third quarter and
        320 basis points from our second quarter as a result of higher sales
        volume and improved Wireless Component margins. This was the highest
        gross margin quarter of the fiscal year, despite the fact that it was
        only the second highest sales volume quarter.
    --  The gross profit margins of our Wireless Components products improved
        some due to reduced costs and stronger frequency control module sales,
        including a large high-margin aircraft order.
    --  The gross profit margins of our Wireless Solutions products decreased
        some due to increased costs resulting from the introduction of new
        products into volume manufacturing and an increase in inventory reserves
        for older products.
    --  Operating expenses of $2.6 million were comparable to our third quarter
        (without restructuring and impairment expenses). As a result of our cost
        reduction efforts, operating expenses in the fourth quarter were $1.5
        million lower than the $4.1 million our first quarter.
    --  Operating cash flow for our fourth quarter was $1.3 million and total
        operating cash flow for fiscal 2009 was $4.2 million.
    --  We generated positive EBITDA of $637,000 for the quarter and positive
        EBITDA for the full year of $489,000.
    --  Our balance sheet continues to improve with ending cash of $0.6 million
        at August 31, 2009 and working capital of nearly $3.0 million, even
        though our debt to our senior lender of $3.6 million is classified as
        current.
    --  We reduced net inventory $700,000 in the fourth quarter and $4.5 million
        (47%) for the year. We continue to manage inventories aggressively, but
        do not anticipate dramatic reductions going forward. Inventory
        management remains a key as we balance the need to remain responsive to
        customers, who are providing reduced order visibility, against increased
        lead-time requirements from some of our suppliers. We have encountered
        longer lead times from several of our key suppliers due to increases in
        their market demand. We are working with these suppliers and our
        customers to mitigate these effects, but there could be some negative
        impact for the next quarter or two.
    --  We reduced our total bank debt by $4.9 million, or 52%, in the fiscal
        year, from $9.4 million at fiscal year-end August 31, 2008 to $4.5
        million at August 31, 2009.
    --  Our revolving line of credit ($3.6 million at August 31, 2009) is
        classified as a current liability on our balance sheet. It was reduced
        $1.0 million in the fourth quarter, financed through positive operating
        cash flow.
    --  We paid down accounts payable and other current liabilities by $3.9
        million during the fiscal year. Other current liabilities at year-end
        include $700,000 of customer advance payments that will be paid back in
        the 12 months beginning December 1, 2009.
    --  We launched three new products in recent months. The first was the
        LPR2430 Series of Radio Frequency (RF) transceiver modules, adding to
        our 802.15.4 wireless sensor networking line of products for original
        equipment manufacturers (OEMs). The second was the DNT2400, which is the
        second product in our innovative line of highly configurable, low-cost,
        long-range frequency hopping spread spectrum (FHSS) modules for OEMs.
        Subsequent to the end of the fourth quarter, we expanded our low-power
        RFIC line of products with the addition of the TRC 105 radio in the
        300MHz to 510MHz frequency range.
    --  We continued to upgrade our sales channels with the addition of Jay
        Stone & Associates to our world-wide sales and distribution network plus
        strengthening of our central European Sales Channel with the addition of
        Welotec GmbH.

Product Mix forcurrent and comparative quarter sales were:

Wireless Solutions Group        Q4 FY09        Q3 FY09        Q4 FY08

Cirronet Modules                $1.7 Million   $1.3 Million   $3.2 Million

RFM Virtual Wire(R) & RFIC      $2.5 Million   $2.3 Million   $2.8 Million

Subtotal                        $4.2 Million   $3.6 Million   $6.0 Million

Wireless Components Group

Low-power Components            $0.9 Million   $0.7 Million   $1.5 Million

Filter Products                 $1.6 Million   $1.9 Million   $4.1 Million

Frequency Control Modules       $0.8 Million   $0.3 Million   $0.8 Million

Subtotal                        $3.3 Million   $2.9 Million   $6.4 Million

Total Sales                     $7.5 Million   $6.5 Million   $12.4 Million

Market Diversification for current and comparative quarter sales was:

                                Q4 FY09*       Q3 FY09*       Q4 FY08*

Automotive                      19%            23%            23%

Consumer                        9%             6%             18%

Industrial                      30%            32%            25%

Medical                         25%            21%            13%

Telecom                         8%             12%            14%

Other**                         9%             6%             7%

Geographic Diversification for current and comparative quarter sales was:

                                Q4 FY09        Q3 FY09        Q4 FY08

North America                   53%            50%            44%

Europe                          11%            10%            13%

Asia and the rest of the world  36%            40%            43%

*Market classifications involve the Company's attempt to classify distribution sales which are recognized upon shipment and whose market classification is estimated based upon point-of-sales information provided to the Company by the distributors.

**Other includes the government and those sales through distribution which are not considered material for tracking by market application by RFM's distributors.

Non-GAAP Financial Measures (EBITDA)

As a supplemental disclosure, we report Earnings before Interest, Taxes, Depreciation and Amortization (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 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 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 EBITDA will be included in our full earnings release.

About RFM

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 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, 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, our lenders' willingness to work with us in structuring credit facilities as needed, maintaining favorable terms of sales with customers and suppliers, 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, 2008. 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 1-888-661-5182, 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 1-888-203-1112 (pass code 1477424). This replay will be available, through November 3, 2009.

Internet Access:

To access the conference call via the web, participants should access RFM's website at www.rfm.com, click on Investor Relations page, at least 10 minutes prior to the call and log in to ensure web browser compatibility.

RF MONOLITHICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS -UNAUDITED

(In Thousands, Except
Per-Share Amounts)

                                Three Months             Twelve Months

                                Ended August 31,         Ended August 31,

                                  2009        2008         2009        2008

                                                                     (a)

SALES                           $ 7,485     $ 12,384     $ 31,984    $ 54,661

COST OF SALES                     4,683       7,816        20,362      34,099

GROSS PROFIT                      2,802       4,568        11,622      20,562

OPERATING EXPENSES:

Research and development          831         1,667        3,961       7,101

Sales and marketing               1,142       1,930        5,116       8,403

General and administrative        602         1,068        3,265       4,301

Restructuring and fixed asset     -           538          444         858
impairment

Impairment - goodwill and         -           15,654       1,583       15,654
intangibles

Total                             2,575       20,857       14,369      36,317

INCOME (LOSS) FROM OPERATIONS     227         (16,289 )    (2,747 )    (15,755 )

OTHER INCOME (EXPENSE):

Interest income                   -           1            1           17

Interest expense                  (159   )    (194    )    (625   )    (707    )

Other                             2           19           (23    )    122

Total                             (157   )    (174    )    (647   )    (568    )

INCOME (LOSS) BEFORE INCOME       70          (16,463 )    (3,394 )    (16,323 )
TAXES

Income tax expense (benefit)      1           (163    )    (99    )    (125    )

INCOME (LOSS) FROM CONTINUING     69          (16,300 )    (3,295 )    (16,198 )
OPERATIONS

LOSS FROM DISCONTINUED            (7     )    (3,181  )    (157   )    (4,691  )
OPERATIONS

NET INCOME (LOSS)               $ 62        $ (19,481 )  $ (3,452 )  $ (20,889 )

EARNINGS (LOSS) PER SHARE :

Basic from continuing           $ 0.01      $ (1.66   )  $ (0.33  )  $ (1.68   )
operations

Basic from discontinued           0.00        (0.33   )    (0.02  )    (0.49   )
operations

Basic                           $ 0.01      $ (1.99   )  $ (0.35  )  $ (2.17   )

Diluted from continuing         $ 0.01      $ (1.66   )  $ (0.33  )  $ (1.68   )
operations

Diluted from discontinued         0.00        (0.33   )    (0.02  )    (0.49   )
operations

Diluted                         $ 0.01      $ (1.99   )  $ (0.35  )  $ (2.17   )

WEIGHTED AVERAGE COMMON SHARES

OUTSTANDING:

Basic                             10,016      9,809        9,934       9,627

Diluted                           10,756      9,809        9,934       9,627

(a) Derived from audited financial statements.

RF MONOLITHICS, INC.

EBITDA - EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION & AMORTIZATION

(In Thousands)

                                   Three Months         Twelve Months

                                   Ended August 31,     Ended August 31,

                                     2009    2008         2009        2008

Net Loss                           $ 62    $ (19,481 )  $ (3,452 )  $ (20,889 )

Add back:

Interest expense                     159     194          625         707

Taxes                                1       (163    )    (99    )    (125    )

Depreciation                         235     333          1,007       1,309

Amortization:

Patents                              69      58           261         195

Intangibles from acquisitions (1)    -       17,872       1,704       18,994

Stock compensation                   111     145          443         508

Total amortization                   180     18,075       2,408       19,697

(1) Includes impairment

EBITDA                             $ 637   $ (1,042  )  $ 489       $ 699

RF MONOLITHICS, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(In Thousands, except par value)

                                                        August 31,   August 31,

                                                          2009         2008

                                                                     (a)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents                               $ 585        $ 1,254

Trade receivables - net                                   4,712        8,434

Inventories - net                                         5,015        9,539

Prepaid expenses and other                                315          265

Assets of discontinued operations                         36           174

Total current assets                                      10,663       19,666

PROPERTY AND EQUIPMENT - Net                              2,223        3,090

GOODWILL                                                  556          556

INTANGIBLES - Net                                         369          2,073

OTHER ASSETS - Net                                        645          902

ASSETS OF DISCONTINUED OPERATIONS                         -            79

TOTAL                                                   $ 14,456     $ 26,366

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of long term debt - bank                $ 3,646      $ 1,333

Current portion of mortgage                               60           -

Capital lease obligations - current portion               41           48

Accounts payable - trade                                  2,169        5,406

Accrued expenses and other current liabilities            1,755        2,073

Liabilities of discontinued operations                    -            321

Total current liabilities                                 7,671        9,181

LONG-TERM DEBT - Less current portion:

Notes payable - bank                                      -            8,097

Mortgage payable                                          820          -

Capital lease obligations                                 55           96

Total long-term debt                                      875          8,193

DEFERRED TAX LIABILITIES - Net                            125          236

Total liabilities                                         8,671        17,610

STOCKHOLDERS' EQUITY:

Common stock: $.001 par value, 20,000 shares
authorized; 10,018

and 9,812 shares issued in 2009 and 2008, respectively    10           10

Additional paid-in capital                                50,531       50,050

Common stock warrants                                     86           86

Treasury stock, 36 common shares at cost                  (227    )    (227    )

Accumulated deficit                                       (44,615 )    (41,163 )

Total stockholders' equity                                5,785        8,756

TOTAL                                                   $ 14,456     $ 26,366

(a) Derived from audited financial statements.

    Source: RF Monolithics, Inc.

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