IRVINE, CA -- Multi-Fineline Electronix reported preliminary fiscal third-quarter net sales would fall short of company guidance on lower handset sales.

The flexible printed circuit board maker said sales for the period ended June 30 would be approximately $136 million, below company guidance of $155 million to $185 million.

Gross margin is expected to be -3.1%, compared to company guidance of approximately breakeven. MFlex will take non-cash charges of $7.5 million for goodwill impairment and $3.1 million to reflect a valuation allowance to reduce the value of certain deferred tax assets. The company also expects about $9.6 million in stock-based compensation expenses. The company expects to report cash and cash equivalents of $114.1 million, and $73.6 million in inventory.

For its fiscal fourth quarter the MFlex expects net sales of $195 million to $215 million and gross margin of 1 to 3% based on production build plans, projected sales volume and anticipated product mix.

Chief executive Reza Meshgin said, "Our third-quarter results reflect continued soft conditions in the mobility market.  While we had contemplated this in our outlook, we expected a back-end loaded quarter with an acceleration of orders in June. In addition to challenging market conditions which caused one program with a newer customer not to track as expected, the June demand uptick did not materialize as the start-up of a number of new programs shifted into our fourth quarter. As a result, the reduced sales level and further overhead under-absorption negatively impacted our gross margin during the quarter."

"In addition, our sales results and mix reflect a more selective approach toward program opportunities.  We deemphasized production of lower-margin programs in an effort to pursue the most profitable opportunities going forward," he said. Meshgin said MFlex anticipates a rebound in revenue and margin in its fourth quarter and continued momentum into fiscal 2014. The company, which counts Apple as a major customer, is seeking to diversify its customer and product base to support longer-term growth.

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