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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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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 27, 1999

OR

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

Commission file number 0-23818

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MERIX CORPORATION(Exact name of registrant as specified in its charter)

|OREGON                                                         |  | 93-1135197                             
|-------------------------------------------------------------- |  | ---------------------------------------
|(State or other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification Number)
|1521 Poplar Lane, Forest Grove, Oregon                         |  | 97116                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             

(503) 359-9300(Registrant's telephone number)

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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 January 3, 2000 was 6,453,007 shares.

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MERIX CORPORATION

FORM 10-Q

TABLE OF CONTENTS

|        |  |                                                                                                          |  | Page
|------- |  | -------------------------------------------------------------------------------------------------------- |  | ----
|Part I  |  | Financial Information                                                                                    |  |     
|Item 1. |  | Financial Statements:                                                                                    |  |     
|        |  | Balance Sheets as of November 27,1999 and May 29,1999                                                    |  | 2   
|        |  | Statements of Operations for the three months and six months ended November 27,1999 and November 28,1998 |  | 3   
|        |  | Statements of Cash Flows for the six months ended November 27,1999 and November 28,1998                  |  | 4   
|        |  | Notes to Financial Statements                                                                            |  | 5   
|Item 2. |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                    |  | 7   
|Item 3. |  | Quantitative and Qualitative Disclosure About Market Risk                                                |  | 11  
|Part II |  | Other Information                                                                                        |  |     
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                      |  | 12  
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                         |  | 12  
|        |  | Signature                                                                                                |  | 13  

1



## 

PART I. FINANCIAL INFORMATION

MERIX CORPORATION

BALANCE SHEETS

(Unaudited, in thousands)

|                                                                                                                    |  | Nov. 27,
1999 |         | May 29,
1999 |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | ------------ | -
|Assets                                                                                                              |  |               |         |              |  
|Cash and short-term investments                                                                                     |  | $             | 15,847  |              | $
|Accounts receivable, net of allowance of $237                                                                       |  |               | 17,409  |              |  
|Inventories                                                                                                         |  |               | 8,699   |              |  
|Deferred tax asset                                                                                                  |  |               | 713     |              |  
|Other current assets                                                                                                |  |               | 664     |              |  
|                                                                                                                    |  |               |         |              |  
|Total current assets                                                                                                |  |               | 43,332  |              |  
|Property, plant and equipment, net                                                                                  |  |               | 56,366  |              |  
|Deferred tax asset                                                                                                  |  |               | 7,666   |              |  
|Other assets                                                                                                        |  |               | 622     |              |  
|                                                                                                                    |  |               |         |              |  
|Total assets                                                                                                        |  | $             | 107,986 |              | $
|                                                                                                                    |  |               |         |              |  
|Liabilities and Shareholders' Equity                                                                                |  |               |         |              |  
|Accounts payable                                                                                                    |  | $             | 12,354  |              | $
|Accrued compensation                                                                                                |  |               | 2,627   |              |  
|Current portion of long-term debt                                                                                   |  |               | 9,149   |              |  
|Other accrued liabilities                                                                                           |  |               | 1,457   |              |  
|                                                                                                                    |  |               |         |              |  
|Total current liabilities                                                                                           |  |               | 25,587  |              |  
|Long-term debt                                                                                                      |  |               | 29,149  |              |  
|                                                                                                                    |  |               |         |              |  
|Total liabilities                                                                                                   |  |               | 54,736  |              |  
|Shareholders' equity:                                                                                               |  |               |         |              |  
|Preferred stock, no par value; authorized 10,000 shares; none issued                                                |  |               |        |              |  
|Common stock, no par value; authorized 50,000 shares; issued and outstanding 2000: 6,444 shares, 1999: 6,370 shares |  |               | 45,885  |              |  
|Unearned compensation                                                                                               |  |               |        |              |  
|Retained earnings                                                                                                   |  |               | 7,365   |              |  
|                                                                                                                    |  |               |         |              |  
|Total shareholders' equity                                                                                          |  |               | 53,250  |              |  
|                                                                                                                    |  |               |         |              |  
|Total liabilities and shareholders' equity                                                                          |  | $             | 107,986 |              | $
|                                                                                                                    |  |               |         |              |  

The
accompanying notes are an integral part of the financial statements.

2

MERIX CORPORATION

STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share amounts)

|                                       |  | Three Months Ended |        | Six Months Ended |  
|-------------------------------------- |  | ------------------ | ------ | ---------------- | -
|
|Net sales                              |  | $                  | 35,882 |                  | $
|Cost of sales                          |  |                    | 29,722 |                  |  
|                                       |  |                    |        |                  |  
|Gross profit (loss)                    |  |                    | 6,160  |                  |  
|Operating expenses:                    |  |                    |        |                  |  
|Engineering                            |  |                    | 1,083  |                  |  
|Selling, general and administrative    |  |                    | 2,516  |                  |  
|Restructuring                          |  |                    |       |                  |  
|                                       |  |                    |        |                  |  
|Total operating expenses               |  |                    | 3,599  |                  |  
|Operating income (loss)                |  |                    | 2,561  |                  |  
|Interest and other expense, net        |  |                    | (600   | )                |  
|                                       |  |                    |        |                  |  
|Income (loss) before income taxes      |  |                    | 1,961  |                  |  
|Income tax (expense) benefit           |  |                    | (765   | )                |  
|                                       |  |                    |        |                  |  
|Net income (loss)                      |  | $                  | 1,196  |                  | $
|                                       |  |                    |        |                  |  
|Net income (loss) per share:           |  |                    |        |                  |  
|Basic                                  |  | $                  | 0.19   |                  | $
|                                       |  |                    |        |                  |  
|Diluted                                |  | $                  | 0.18   |                  | $
|                                       |  |                    |        |                  |  
|Shares used in per share calculations: |  |                    |        |                  |  
|Basic                                  |  |                    | 6,427  |                  |  
|                                       |  |                    |        |                  |  
|Diluted                                |  |                    | 6,683  |                  |  
|                                       |  |                    |        |                  |  

The
accompanying notes are an integral part of the financial statements.

3

MERIX CORPORATION

STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

|                                                                                         |  | Six Months Ended |       
|---------------------------------------------------------------------------------------- |  | ---------------- | ------
|
|Cash flows from operating activities:                                                    |  |                  |       
|Net income (loss)                                                                        |  | $                | 2,230 
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                  |       
|Depreciation and amortization                                                            |  |                  | 4,119 
|Deferred income taxes                                                                    |  |                  | 1,427 
|Restructuring charge                                                                     |  |                  |      
|Contribution of common stock to defined contribution plan                                |  |                  | 587   
|Other                                                                                    |  |                  | 230   
|Changes in assets and liabilities:                                                       |  |                  |       
|Accounts receivable                                                                      |  |                  | 99    
|Inventories                                                                              |  |                  | (2,162
|Other current assets                                                                     |  |                  | 277   
|Accounts payable                                                                         |  |                  | 250   
|Accrued compensation                                                                     |  |                  | 115   
|Other accrued liabilities                                                                |  |                  | (665  
|                                                                                         |  |                  |       
|Net cash provided by operating activities                                                |  |                  | 6,507 
|                                                                                         |  |                  |       
|Cash flows from investing activities:                                                    |  |                  |       
|Short-term investments:                                                                  |  |                  |       
|Purchases                                                                                |  |                  |      
|Maturities                                                                               |  |                  | 7,507 
|Capital expenditures                                                                     |  |                  | (4,695
|Net proceeds from sale-leaseback of equipment                                            |  |                  | 4,492 
|Proceeds from sale of assets                                                             |  |                  | 78    
|                                                                                         |  |                  |       
|Net cash provided by (used in) investing activities                                      |  |                  | 7,382 
|                                                                                         |  |                  |       
|Cash flows from financing activities:                                                    |  |                  |       
|Principal payments on long-term debt                                                     |  |                  | (4,000
|Proceeds from exercise of stock options                                                  |  |                  | 84    
|Reacquired common stock                                                                  |  |                  |      
|                                                                                         |  |                  |       
|Net cash used in financing activities                                                    |  |                  | (3,916
|                                                                                         |  |                  |       
|Increase (decrease) in cash and cash equivalents                                         |  |                  | 9,973 
|Cash and cash equivalents at beginning of period                                         |  |                  | 5,874 
|                                                                                         |  |                  |       
|Cash and cash equivalents at end of period                                               |  |                  | 15,847
|Short-term investments                                                                   |  |                  |      
|                                                                                         |  |                  |       
|Cash and short-term investments at end of period                                         |  | $                | 15,847
|                                                                                         |  |                  |       
|Supplemental Disclosures:                                                                |  |                  |       
|Cash paid for:                                                                           |  |                  |       
|Interest, net of amount capitalized                                                      |  | $                | 1,756 
|Noncash transactions:                                                                    |  |                  |       
|Surrender of unvested shares of restricted stock                                         |  | $                |      

The
accompanying notes are an integral part of the financial statements.

4

MERIX CORPORATION

NOTES TO FINANCIAL STATEMENTS

(Dollars in thousands)

Note 1. BASIS OF PRESENTATION

The accompanying unaudited financial statements of Merix Corporation (the Company) 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 29, 1999.

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 27, 1999 are not necessarily indicative of the results to be expected for
the full year.

The
Company's fiscal year is the 52 or 53-week period ending the last Saturday in May. Fiscal year 2000 is a 52-week year ending May 27, 2000 and fiscal
year 1999 was a 52-week year ended May 29, 1999.

Note 2. INVENTORIES

|                |  | Nov. 27,
1999 |       | May 29,
1999
|--------------- |  | ------------- | ----- | ------------
|Raw materials   |  | $             | 1,003 |             
|Work in process |  |               | 4,489 |             
|Finished goods  |  |               | 3,207 |             
|                |  |               |       |             
|Total           |  | $             | 8,699 |             
|                |  |               |       |             

Note 3. PROPERTY, PLANT AND EQUIPMENT

|                                   |  | Nov. 27,
1999 |         | May 29,
1999 |  
|---------------------------------- |  | ------------- | ------- | ------------ | -
|Land                               |  | $             | 2,190   |              | $
|Buildings and grounds              |  |               | 24,451  |              |  
|Machinery and equipment            |  |               | 83,879  |              |  
|Construction in progress           |  |               | 1,412   |              |  
|                                   |  |               |         |              |  
|                                   |  |               | 111,932 |              |  
|Less accumulated depreciation      |  |               | (55,566 | )            |  
|                                   |  |               |         |              |  
|Property, plant and equipment, net |  | $             | 56,366  |              | $
|                                   |  |               |         |              |  

Note 4. EQUIPMENT LEASE AGREEMENT

In
August 1999, the Company entered into a lease agreement, which allowed for the sale and leaseback of up to $5,000 of manufacturing equipment. As of November 27, 1999,
$4,997 of equipment had been sold under this agreement. Resulting gains from these sales are deferred and amortized on a straight-line basis over the life of the lease. The lease is
classified as an operating lease in accordance with SFAS No. 13, "Accounting for Leases."

5

Note 5. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding for the period. Diluted net income per
share is computed using the weighted average number of shares of common stock and dilutive common equivalent shares related to stock options outstanding during the period. Incremental shares of
256,271 and 183,002 related to outstanding stock options, were included in the calculations of diluted net income per share for the second quarter and first six months of fiscal year 2000,
respectively. As of November 27, 1999, stock options to purchase 188,890 shares had exercise prices above the average market price of the underlying common stock.

Diluted
net loss per share is computed using the weighted average number of shares of common stock outstanding for the period. Stock options to purchase 1,247,302 shares were not
included in the net loss per share calculations for the fiscal year 1999 periods, because to do so would have been antidilutive.

6



## 

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands)

This discussion and analysis is designed to be read in conjunction with our Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth in our Report on Form 10-K for the fiscal year ended May 29, 1999.

Results of Operations

Fiscal year

Our fiscal year is the 52 or 53-week period ending the last Saturday in May. Fiscal year 2000 is a 52-week year ending May 27,
2000 and fiscal year 1999 was a 52-week year ended May 29, 1999.

Net Sales

Our net sales for the second quarter of fiscal year 2000 were $35,882, which represented an increase of 19.5% from net sales of $30,032 in the second quarter
of fiscal year 1999. Net sales for the first six months of fiscal year 2000 were $69,980, which represented an increase of 38.4% from net sales of $50,546 in the first six months of fiscal year 1999.
Net sales increased in the second quarter and first six months of fiscal year 2000 primarily as a result of higher levels of demand from both new and existing customers. In particular, sales to the
communications market segment increased in the second quarter and first six months of fiscal year 2000, compared to the same periods in fiscal year 1999. This increase was a result of rapidly
increasing demand for data communications, primarily associated with the growth of the Internet, and increasing use of wireless communications. Net sales in the first six months of fiscal year 1999
included five months of sales from our Loveland manufacturing facility which we closed in October 1998, and six months of sales from our Soladyne manufacturing facility, which we sold in
February 1999. See "Restructuring" below.

Pricing
of our products, which had been affected by the electronics industry slowdown beginning late in fiscal year 1998, began to stabilize during the last half of fiscal year 1999
and has remained relatively stable during the first six months of fiscal year 2000. Continued price stability of our products is dependent on a variety of factors including continued strength of
customer orders, capacity utilization in the printed circuit board industry, competition from domestic printed circuit board companies and potential future competition from Asian printed circuit board
companies.

Our
five largest original equipment manufacturer (OEM) customers represented 69.9% of net sales in the second quarter of fiscal year 2000 and 70.7% of net sales in the second quarter
of fiscal year 1999. Our five largest OEM customers represented 73.6% of net sales in the first six months of fiscal year 2000 and 69.3% of net sales in the first six months of fiscal year 1999. Our
sales to OEMs include sales made through contract manufacturers. Our sales to contract manufacturers were 48.5% of net sales in the second quarter of fiscal year 2000, 26.0% of net sales in the
second quarter of fiscal year 1999, 50.1% of net sales in the first six months of fiscal year 2000 and 24.7% of net sales in the first six months of fiscal year 1999. The loss of one or more of our
principal customers or a change in the mix of our product sales could have a material adverse effect on our business, financial condition and results of operations.

7

The following table shows for the periods indicated, the percentage of our net sales to the principal end-user markets we serve:

|                     |  | Three Months Ended |   | Six Months Ended
|-------------------- |  | ------------------ | - | ----------------
|
|Market Segments      |  |                    |   |                 
|Communications       |  | 46                 | % | $ 16,432        
|Computers            |  | 25                 |   | 9,088           
|Test and Instruments |  | 26                 |   | 9,242           
|Other                |  | 3                  |   | 1,120           
|                     |  |                    |   |                 
|Total                |  | 100                | % | $ 35,882        
|                     |  |                    |   |                 

Our
90-day backlog was approximately $22,500 at November 27, 1999, compared to approximately $18,000 at the end of fiscal year 1999. The level and timing of orders
placed by our customers vary due to many factors, including customer attempts to manage inventory, timing of new product introductions and variation in demand for customer products. Accordingly, our
backlog is not necessarily indicative of future quarterly or annual financial results.

We
completed the capacity expansion project at our Forest Grove manufacturing facility in May 1999. We also completed the installation in Forest Grove of the manufacturing
equipment transferred from the facility we closed in Loveland at the end of December 1999. Our completion of the expansion project and installation of the Loveland equipment added manufacturing
capacity and has positioned us to take advantage of increasing customer demand.

Gross Margin

Our gross margin was 17.2% in the second quarter of fiscal year 2000 and 1.5% in the second quarter of fiscal year 1999. Our gross margin was 17.5% in the
first six months of fiscal year 2000 and (13.2)% in the first six months of fiscal year 1999. Gross profit increased in the second quarter and first six months of fiscal year 2000 primarily as a
result of higher capacity utilization, a favorable product mix and cost reductions. Gross loss in the first six months of fiscal year 1999 included a $2,118 write-off of inventory related
to the restructuring. See "Restructuring" below. Our gross margins may be affected by various factors including product mix, capacity utilization, production yields, price changes and changes in our
cost structure.

Engineering

Our engineering expenses were $1,083 (3.0% of net sales) in the second quarter of fiscal year 2000 and $1,021 (3.4% of net sales) in the second quarter of
fiscal year 1999. Our engineering expenses were $2,111 (3.0% of net sales) in the first six months of fiscal year 2000 and $2,047 (4.0% of net sales) in the first six months of fiscal year 1999.
Engineering expenses were reduced by approximately $250 in the second quarter of fiscal year 1999 and $650 in the first six months of fiscal year 1999, as a result of our capitalization of engineering
labor related to the Forest Grove expansion project. Excluding the effect of capitalization of engineering labor, engineering expenses decreased in the second quarter and first six months of fiscal
year 2000 due to reduced headcount resulting from the restructuring. See "Restructuring" below. The decreases as a percentage of sales were a result of a higher level of sales in the first six months
of fiscal year 2000.

Selling, General and Administrative

Our selling, general and administrative expenses were $2,516 (7.0% of net sales) in the second quarter of fiscal year 2000 and $2,109 (7.0% of net sales) in
the second quarter of fiscal year 1999. Our selling, general and administrative expenses were $4,891 (7.0% of net sales) in the first six months of

8

fiscal year 2000 and $4,911 (9.7% of net sales) in the first six months of fiscal year 1999. Selling, general and administrative expenses increased in the second quarter of fiscal year 2000 primarily
due to an expansion of our sales force and increased commissions, both a result of the continued higher level of sales. These expenses were relatively flat in the comparative six-month
periods. While selling, general and administrative expenses increased in the second quarter of fiscal year 2000, these expenses decreased in the first quarter of fiscal year 2000, compared to the
first quarter of fiscal year 1999, primarily as a result of reduced headcount resulting from the restructuring. See "Restructuring" below.
The decrease as a percentage of sales in the six-month periods was a result of a higher level of sales in the first six months of fiscal year 2000.

Restructuring

In the first quarter of fiscal year 1999, we announced a restructuring plan to improve our capacity utilization and to lower our cost structure. We closed our
Loveland, Colorado facility, reduced approximately 35 employees from administrative, engineering and support functions at our Forest Grove, Oregon location and sold our Soladyne facility in San Diego,
California. We sold the Soladyne facility in February 1999. We completed the closure of the Loveland facility in October 1998 and laid off approximately 340 manufacturing and support
employees in Loveland. We transferred a portion of the Loveland production and manufacturing equipment to our Forest Grove site, and completed installation of this equipment at the end of
December 1999.

In
the third quarter of fiscal year 1999, we reversed $7,109 of the restructuring charge taken in the first quarter of the year. The reversal was the result of a favorable termination
of the Loveland facility lease, higher than estimated proceeds from the sale of excess equipment and the sale of the Soladyne facility.

Interest and Other Expense, net

Our interest and other expense, net was $600 in the second quarter of fiscal year 2000 and $434 in the second quarter of fiscal year
1999.Interest and other expense, net was $1,581 in the first six months of fiscal year 2000 and $924 in the first six months of fiscal year 1999. We
capitalized interest related to the Forest Grove capacity expansion of $220 in the second quarter of fiscal year 1999 and $400 in the first six months of fiscal year 1999. No interest was capitalized
in fiscal year 2000. Additionally, in the first six months of fiscal year 2000, we incurred finance charges in connection with the restructuring of our senior unsecured notes and certain manufacturing
equipment was retired.

Income Taxes

Our effective tax rate was approximately 39% in the first six months of fiscal year 2000 compared to 38% in 1999. We expect our effective tax rate will be
approximately 39% for fiscal year 2000. Based on our net operating losses available for carryforward, we expect to make no cash payments for income taxes for fiscal year 2000.

Liquidity and Capital Resources

Our cash and short-term investments were $15,847 at November 27, 1999 compared to $13,381 at May 29, 1999. Our working capital
increased to $17,745 at November 27, 1999 from $14,322 at May 29, 1999, primarily as a result of increases in cash and inventories.

Cash
provided by operating activities in the first six months of fiscal year 2000 was $6,507. Cash provided by operating activities primarily included net income for the period and
adjustments for depreciation and amortization, primarily offset by an increase in inventories. Our inventories increased as a result of a higher level of production in the first six months of fiscal
year 2000.

9

Cash provided by investing activities in the first six months of fiscal year 2000 was $7,382. Cash provided by investing activities included maturities of short-term
investments, net proceeds from the
sale-leaseback of equipment and capital expenditures for manufacturing equipment. We have capital commitments of approximately $1,755, primarily for manufacturing equipment.

Cash
used in financing activities in the first six months of fiscal year 2000 was $3,916, which primarily included a principal payment on our senior unsecured notes.

We
have a secured note payable to Tektronix, Inc. with $2,299 outstanding at November 27, 1999. The note bears interest at 7.5% and is payable in annual installments of
$1,149 in June 2000 and $1,150 in June 2001.

We
have $36,000 outstanding under a private placement of senior unsecured notes with two insurance companies, with interest payable semi-annually at 7.92%. The notes
provide for semi-annual principal payments of $4,000, which began in September 1999, with a final principal payment of $8,000 payable in September 2003.

In
August 1999, we entered into a lease agreement, which allowed us to sell and leaseback up to $5,000 of manufacturing equipment. As of November 27, 1999, we had sold
$4,997 of equipment under this agreement. The lease is classified as an operating lease in accordance with SFAS No. 13, "Accounting for Leases."

We
believe our existing capital resources and cash generated from operations should be sufficient to meet our working capital and capital expenditure requirements through at least the
next 12 months.

Year 2000 Disclosure

We developed a program to assess, remediate and test our computer software programs and operating systems, including IT and non-IT systems, to
determine their readiness for the Year 2000 (the "Year 2000 Program"). The term "computer software programs and operating systems" includes information technology (IT) systems such as enterprise
software, operating systems, networking components, application and data servers, PC hardware, accounting, data processing and other information systems. "Computer software programs and operating
systems" also includes systems that are non-IT systems, such as shop-floor control and manufacturing control systems, telephone systems, fax machines, and other miscellaneous
systems and equipment.

We
completed the assessment, remediation and testing of our computer software programs and operating systems during 1999. During the testing, we did not experience problems processing
data or effecting transactions. As of the date of this filing, we have not experienced any Year 2000 issues with respect to our computer software programs and operating systems.

We
contacted our critical suppliers and performed certain Year 2000 on-site assessments during 1999. We did this to determine whether a Year 2000 disruption could impede
our critical suppliers' ability to continue to provide goods and services to us and to determine what actions, if any, we may take in response. Responses from our critical suppliers and results of our
on-site assessments indicated that they were Year 2000 compliant. In addition, based on contact with our major customers and given their general size and sophistication, we believed we
would not experience material Year 2000 disruptions which would result in loss or postponement of significant orders from them. As of the date of this filing, we have not experienced any Year 2000
disruptions with our critical suppliers or our major customers, or problems in processing orders and billings.

We
believed our most reasonably likely worst-case Year 2000 scenario would relate to problems with the systems of third parties such as (a) infrastructure suppliers
(e.g., electricity supply, water and sewer service), and (b) telecommunications and transportation supply channels. As of the date of this

10

filing, we have not experienced difficulties resulting in disruption of service to us from our infrastructure suppliers or our telecommunications and transportation supply channels.

We
spent approximately $428 in addressing Year 2000 issues. The source of these funds was our working capital. We do not expect to incur additional expense in addressing Year 2000
issues.

While
we believe the risk is low, it is early in the year 2000 and there is a possibility that a software program or system Year 2000 compliance failure related to our internal
systems and software or those of our critical suppliers or major customers could still occur. In such event, we could be prevented from fulfilling or obtaining customer orders. The lost revenues that
would result could have a material adverse effect on our business, results of operations and financial condition. Additionally, our inability to operate our manufacturing facility for any significant
period as a result of a Year 2000 compliance failure, or any other Year 2000 compliance failure, if not quickly remedied, could have a material adverse effect on the our business, results of
operations and financial condition.

Forward-looking Statements

Information included in our Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. Our
actual results may differ significantly from those projected in the forward-looking statements. Factors and other risks that might cause our results to differ significantly from those projected in the
forward-looking statements are listed from time to time in our Securities and Exchange Commission reports or otherwise disclosed by us.

We
undertake no obligation to publicly release the results of any revision to our forward-looking statements which may be made to reflect subsequent events or circumstances or the
occurrence of unanticipated events.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

To date, we have not used derivative financial instruments for speculative purposes which expose us to market risk. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in this Report.

11



## 

PART II. OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Our annual meeting of shareholders was held on September 27, 1999. The only item considered at the meeting was the election of directors. The results of
the voting for our nominees for director identified in our Proxy Statement were as follows:

|                     |  | Votes For |  | Votes Withheld
|-------------------- |  | --------- |  | --------------
|Deborah A. Coleman   |  | 6,199,652 |  | 80,905        
|Carlene M. Ellis     |  | 6,267,347 |  | 13,210        
|Mark R. Hollinger    |  | 6,272,482 |  | 8,075         
|William C. McCormick |  | 6,272,562 |  | 7,995         
|Carl W. Neun         |  | 6,272,512 |  | 8,045         
|Dr. Koichi Nishimura |  | 6,272,322 |  | 8,235         
|Robert C. Strandberg |  | 6,272,372 |  | 8,185         

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

|Exhibit No. |  |                                                                                                                 
|----------- |  | ----------------------------------------------------------------------------------------------------------------
|10.25*      |  | Indemnity Agreement between the Company and Daniel T. Olson as of October 25, 1999                              
|10.26*      |  | Executive Severance Agreement between the Company and Daniel T. Olson as of December 1, 1999                    
|10.27*      |  | Second Amended Executive Severance Agreement between the Company and Deborah A. Coleman as of September 27, 1999
|27          |  | Financial Data Schedule                                                                                         

---

No
reports on Form 8-K were filed during the quarter ended November 27, 1999.

12



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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 7th day of January, 2000.

| |  | MERIX CORPORATION
| |  | -----------------
| |  | By:              

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## QuickLinks

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands)ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

PART II. OTHER INFORMATIONITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

SIGNATURE