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FEI Company Reports Second Quarter Financial Results
Record Revenue and Second-quarter Bookings
HILLSBORO, Ore., Jul 29, 2008 (BUSINESS WIRE) --
FEI Company (NASDAQ:FEIC) reported revenue at record levels for the fifth time in the last six quarters, as continued growth in the company's Research & Industry and Life Sciences markets offset a cyclical decline in its Electronics market. Operating and net income were affected by the company's previously-announced restructuring program. Net sales for the quarter ended June 29, 2008 of $154.0 million were up 2% compared to the first quarter of 2008 and up 4% compared to the second quarter of 2007. Bookings in the quarter totaled $140.4 million, compared with $150.5 million in the first quarter of 2008 and $136.2 million for the second quarter of 2007. Bookings in the latest quarter were the highest for a second quarter in the company's history. The backlog at the end of the quarter was $296.0 million, of which over 90% is expected to ship in the next four quarters.
Operating income for the second quarter of 2008 was $4.9 million, compared with $8.8 million in the first quarter of 2008 and $15.0 million in last year's second quarter. Restructuring expenses in the latest quarter reduced operating income by $2.3 million or $0.05 per diluted share. Net income for the second quarter of 2008 was $4.9 million, compared with $8.2 million in the first quarter of 2008 and $14.0 million in last year's second quarter. Diluted earnings per share in the latest quarter were $0.12, compared with $0.20 in the first quarter of 2008 and $0.33 in the second quarter of 2007. The gross profit margin was 38.1% in the second quarter of 2008, compared with 39.1% in the first quarter of 2008. "The strength of our market and geographic diversity was again demonstrated in the second quarter," said Don Kania, president and CEO of FEI, "despite the negative impact of a
weak dollar and a difficult semiconductor capital equipment market. "We expect our second-half bookings to be above first-half levels," continued Kania, "based on our flow of exciting new products, expanding global demand for nanotechnology tools, and technology spending from our semiconductor customers. In addition to continued growth in 2009, we expect the benefits of our restructuring program to grow as the year progresses, including a lower cost structure, better currency balance and more efficient factory utilization." Bookings and revenue comparisons for the company's market segments and other data are included in the supplementary information attached to this release, along with detailed statements of operations and balance sheets. Guidance for Q3 2008 and Outlook for Q4 2008 FEI currently expects net sales for the seasonally slow third quarter of 2008
to be in the range of $144 million to $150 million. Bookings are expected to be above $150 million, and GAAP earnings per share are expected to be in the range of $0.04 to $0.09, assuming a 30% tax rate and restructuring charges estimated at $0.04. Earnings are expected to be negatively impacted compared with the second quarter due to the strong euro relative to the U.S. dollar, lower interest income on invested cash balances, and a higher tax rate due to restructuring costs. On June 16, 2008, the company used existing cash balances to repay $148.9 million of zero-coupon convertible bonds. The convertible debt repayment reduced the weighted average total of outstanding shares used to calculate diluted earnings per share to 41.5 million shares in the second quarter and will reduce the total further to approximately 37.2 million shares in the third quarter. The preliminary
outlook for the fourth quarter is for increased revenue, gross margins and net income compared with the third quarter guidance. Investor Conference Call -- 2:00 p.m. PDT Tuesday, July 29, 2008 Parties interested in listening to FEI's quarterly conference call may do so by dialing 1-800-257-1836 (domestic, toll-free) or 1-303-262-2053 (international) and asking for the FEI Second Quarter Earnings call. The call can also be accessed via the web by going to FEI's Investor Relations page at www.fei.com, where the webcast will also be archived. A telephone replay of the call will also be accessible for one month by dialing 1-800-405-2236 (US) or 1-303-590-3000 (international) and entering the access code 11117189#. About FEI FEI (Nasdaq:FEIC) is a global leader in providing innovative instruments for nanoscale
imaging, analysis and prototyping. FEI focuses on
delivering solutions that provide groundbreaking results and accelerate research, development and manufacturing cycles for its customers in semiconductor and data storage, academic and industrial R&D and life sciences markets. With R&D centers in North America and Europe, and sales and service operations in more than 50 countries around the world, FEI's Tools for Nanotech(TM) are bringing the nanoscale within the grasp of leading researchers and manufacturers. More information can be found online at: www.fei.com. Safe Harbor Statement This news release contains forward-looking statements that include our guidance for the third and fourth quarters of 2008; demand in our markets; the expected shipment of our backlog; expectations for future bookings; the impact of a weak dollar and our efforts to mitigate that impact;
the timing, scope and impact of the planned
restructuring, the impact of new products and the reduction in shares used to calculate diluted earnings per share. Factors that could affect these forward-looking statements include, but are not limited to, the strength of the Research and Industry, Electronics and Life Sciences segments; cyclical changes in the data storage and semiconductor industries, which are the major components of the Electronics market; fluctuations in foreign exchange, interest and tax rates; our continued ability to maintain deferral accounting of hedge transactions; valuation of the auction rate securities we hold and classification of them on the balance sheet; inability to produce a higher volume of products with existing personnel or facilities; reduced profitability due to failure to achieve or sustain margin improvement in service or product manufacturing; the relative mix of higher-margin and
lower-margin products; failure to achieve expected benefits of restructuring plans; changes in restructuring plans; risks associated with shipping a high percentage of the company's quarterly revenue in the last month of the quarter; difficulty in obtaining parts from suppliers; inability to achieve cost reductions in manufacturing or other areas; lower than expected customer orders; cancellation of customer orders; customer requests to defer planned shipments; failure of customers to adopt new technologies; increased competition and new product offerings from competitors; lower average sales prices and reduced margins on some product sales due to increased competition; failure of the company's products and technology to find acceptance with customers; delays in shipping products for technical performance, component supply or other reasons; unfavorable business conditions and lack of
growth in the general economy, both domestic and foreign; potential additional restructurings and reorganizations not presently anticipated; reduced sales due to geopolitical risks; changes in trade policies and tariff regulations; changes in the regulatory environment in the nations where we do business; inability to overcome technological barriers; additional selling, general and administrative or research and development expenses; additional costs related to future merger and acquisition activity; and failure of the company to achieve anticipated benefits of acquisitions and collaborations, including failure to achieve financial goals and integrate future acquisitions successfully. Please also refer to our Form 10-K, Forms 10-Q, Forms 8-K and other filings with the U.S. Securities and Exchange Commission for additional information on these factors and other factors that could cause
actual results to differ materially from the forward-looking statements. FEI assumes no duty to update forward-looking statements.
FEI Company and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 29, March 30, December
31,
ASSETS 2008 2008 2007
-------- ---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 84,467 $ 215,343 $ 280,593
Short-term investments in marketable
securities 44,837 48,746 152,041
Short-term restricted cash 19,395 22,679 20,984
Receivables 172,998 184,109 157,120
Inventories 157,763 156,036 138,762
Deferred tax assets 3,524 5,242 4,788
Other current assets 41,171 38,842 36,273
-------- ---------- ----------
Total current assets 524,155 670,997 790,561
Non-current investments in marketable
securities 118,857 127,597 12,758
Long-term restricted cash 23,206 22,463 24,621
Non-current inventories 44,386 43,616 42,168
Property plant and equipment, net 76,173 74,945 74,700
Purchased technology, net 2,034 2,497 2,862
Goodwill 40,839 40,838 40,864
Deferred tax assets 3,359 3,314 2,641
Other assets, net 19,148 17,770 16,834
-------- ---------- ----------
TOTAL $852,157 $1,004,037 $1,008,009
======== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 36,041 $ 41,060 $ 31,156
Accrued payroll liabilities 18,819 20,721 26,115
Accrued warranty reserves 7,159 6,888 6,585
Accrued agent commissions 9,344 10,207 9,119
Deferred revenue 53,567 61,558 60,681
Income taxes payable 6,945 4,973 3,106
Accrued restructuring, reorganization
and relocation 2,149 517 580
Current portion of convertible debt 1,093 150,000 195,882
Other current liabilities 27,201 32,538 29,266
-------- ---------- ----------
Total current liabilities 162,318 328,462 362,490
Convertible debt 115,000 115,000 115,000
Deferred tax liabilities 5,161 5,270 4,479
Other liabilities 48,216 43,255 38,646
SHAREHOLDERS' EQUITY:
Preferred stock - 500 shares
authorized; none issued and
outstanding - - -
Common stock - 70,000 shares
authorized; 36,638, 36,464, and
36,405, shares issued and outstanding
at June 29, 2008, March 30, 2008 and
December 31, 2007 401,881 397,486 395,904
Retained earnings 39,403 34,552 26,398
Accumulated other comprehensive income 80,178 80,012 65,092
-------- ---------- ----------
Total shareholders' equity 521,462 512,050 487,394
-------- ---------- ----------
TOTAL $852,157 $1,004,037 $1,008,009
======== ========== ==========
FEI Company and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks
Ended
----------------------------- -------------------
June 29, March 30, July 1, June 29, July 1,
2008 2008 2007 2008 2007
--------- --------- -------- --------- -------
NET SALES:
Products $119,758 $117,214 $117,156 $236,972 $233,585
Service and
components 34,281 34,432 31,399 68,713 62,929
--------- --------- --------- --------- ---------
Total net
sales 154,039 151,646 148,555 305,685 296,514
--------- --------- --------- --------- ---------
COST OF SALES:
Products 70,384 66,983 63,140 137,367 125,303
Service and
components 25,035 25,438 23,658 50,473 45,711
--------- --------- --------- --------- ---------
Total cost
of sales 95,419 92,421 86,798 187,840 171,014
--------- --------- --------- --------- ---------
Gross profit 58,620 59,225 61,757 117,845 125,500
--------- --------- --------- --------- ---------
OPERATING EXPENSES:
Research and
development 18,496 17,807 15,978 36,303 31,469
Selling, general
and
administrative 32,460 32,159 30,172 64,619 59,746
Amortization of
purchased
technology 459 453 443 912 883
Restructuring,
reorganization
and relocation 2,271 - 168 2,271 (404)
--------- --------- --------- --------- ---------
Total
operating
expenses 53,686 50,419 46,761 104,105 91,694
--------- --------- --------- --------- ---------
OPERATING INCOME 4,934 8,806 14,996 13,740 33,806
--------- --------- --------- --------- ---------
OTHER INCOME
(EXPENSE):
Interest income 4,118 4,999 5,684 9,117 9,972
Interest expense (2,250) (2,231) (2,097) (4,481) (4,073)
Gain on
investment
disposals and
impairment, net - - 497 - 656
Other expense,
net (373) (867) (954) (1,240) (2,228)
--------- --------- --------- --------- ---------
Total other
income
(expense),
net 1,495 1,901 3,130 3,396 4,327
--------- --------- --------- --------- ---------
INCOME FROM
CONTINUING
OPERATIONS BEFORE
TAXES 6,429 10,707 18,126 17,136 38,133
INCOME TAX EXPENSE 1,578 2,553 4,095 4,131 9,172
--------- --------- --------- --------- ---------
INCOME FROM
CONTINUING
OPERATIONS 4,851 8,154 14,031 13,005 28,961
DISCONTINUED
OPERATIONS:
Gain (loss) from
discontinued
operations - - - - -
Gain on disposal,
net of income
taxes - - - - 127
--------- --------- --------- --------- ---------
INCOME FROM
DISCONTINUED
OPERATIONS - - - - 127
--------- --------- --------- --------- ---------
NET INCOME $ 4,851 $ 8,154 $ 14,031 $ 13,005 $ 29,088
========= ======== ========= ========= =========
BASIC NET INCOME
PER SHARE DATA:
From continuing
operations $ 0.13 $ 0.22 $ 0.39 $ 0.36 $ 0.82
========= ======== ========= ========= =========
From discontinued
operations $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.01
========= ======== ========= ========= =========
DILUTED NET INCOME
PER SHARE DATA:
From continuing
operations $ 0.12 $ 0.20 $ 0.33 $ 0.32 $ 0.68
========= ======== ========= ========= =========
From discontinued
operations $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.01
========= ======== ========= ========= =========
WEIGHTED AVERAGE
SHARES
OUTSTANDING:
Basic 36,499 36,435 35,742 36,467 35,149
========= ======== ========= ========= =========
Diluted 41,509 42,370 46,471 41,940 45,889
========= ======== ========= ========= =========
FEI Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Thirteen Weeks Ended Twenty-Six
(1) Weeks Ended
-------------------- -------------
June March July June July
29, 30, 1, 29, 1,
2008 2008 2007 2008 2007
------ ------ ------ ------ ------
NET SALES:
Products 77.7% 77.3% 78.9% 77.5% 78.8%
Service 22.3% 22.7% 21.1% 22.5% 21.2%
------ ------ ------ ------ ------
Total net sales 100.0% 100.0% 100.0% 100.0% 100.0%
------
COST OF SALES:
Products 45.7% 44.2% 42.5% 44.9% 42.3%
Service 16.3% 16.8% 15.9% 16.5% 15.4%
------ ------ ------ ------ ------
Total cost of sales 61.9% 60.9% 41.6% 61.4% 57.7%
------ ------ ------ ------ ------
Gross profit 38.1% 39.1% 41.6% 38.6% 42.3%
------ ------ ------ ------ ------
OPERATING EXPENSES:
Research and development 12.0% 11.7% 10.8% 11.9% 10.6%
Selling, general and
administrative 21.1% 21.2% 20.3% 21.1% 20.1%
Amortization of purchased
technology 0.3% 0.3% 0.3% 0.3% 0.3%
Restructuring, reorganization and
relocation 1.5% 0.0% 0.1% 0.7% -0.1%
------
Total operating expenses 34.9% 33.2% 31.5% 34.1% 30.9%
------ ------ ------ ------ ------
OPERATING INCOME 3.2% 5.8% 10.1% 4.5% 11.4%
------ ------ ------ ------ ------
OTHER INCOME (EXPENSE):
Interest income 2.7% 3.3% 3.8% 3.0% 3.4%
Interest expense -1.5% -1.5% -1.4% -1.5% -1.4%
Gain on investment disposals and
impairment, net 0.0% 0.0% 0.3% 0.0% 0.2%
Other expense, net -0.2% -0.6% -0.6% -0.4% -0.8%
------ ------ ------ ------ ------
Total other income (expense), net 1.0% 1.3% 2.1% 1.1% 1.5%
------ ------ ------ ------ ------
INCOME FROM CONTINUING OPERATIONS
BEFORE TAXES 4.2% 7.1% 12.2% 5.6% 12.9%
------ ------ ------ ------ ------
INCOME TAX EXPENSE 1.0% 1.7% 2.8% 1.4% 3.1%
------ ------ ------ ------ ------
INCOME FROM CONTINUING OPERATIONS 3.1% 5.4% 9.4% 4.3% 9.8%
====== ====== ====== ====== ======
DISCONTINUED OPERATIONS:
Gain (loss) from discontinued
operations 0.0% 0.0% 0.0% 0.0% 0.0%
Gain on disposal, net of income
taxes 0.0% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------
INCOME FROM DISCONTINUED OPERATIONS 0.0% 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------ ------
NET INCOME 3.1% 5.4% 9.4% 4.3% 9.8%
------ ====== ------ ------ ------
(1) Percentages may not add due to rounding.
FEI COMPANY
Supplemental Data Table 1
($ in millions, except per share amounts)
(Unaudited)
----------------------------------------------------------------------
Q2 Ended Q1 Ended Q2 Ended
6/29/2008 3/30/2008 7/1/2007
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Income Statement Highlights
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Consolidated sales $154.0 $151.6 $148.6
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Gross margin 38.1% 39.1% 41.6%
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R&D spending $18.5 $17.8 $16.0
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R&D (% of sales) 12.0% 11.7% 10.8%
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SG&A $32.5 $32.2 $30.2
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SG&A (% of sales) 21.1% 21.2% 20.3%
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Stock compensation expense - COGS $0.2 $0.3 $0.2
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Stock compensation expense - R&D $0.2 $0.2 $0.2
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Stock compensation expense - SG&A $1.4 $1.5 $1.7
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Net income from continuing operations $4.9 $8.2 $14.0
----------------------------------------------------------------------
Net income from discontinued operations $0.0 $0.0 $0.0
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Net income $4.9 $8.2 $14.0
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Diluted earnings per share from
continuing operations $0.12 $0.20 $0.33
----------------------------------------------------------------------
Diluted earnings per share from
discontinued operations $0.00 $0.00 $0.00
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Interest income add back included in
the calculation of diluted EPS $0.2 $0.2 $1.2
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Sales by Market Segment
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Electronics $37.7 $46.5 $61.1
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Research & Industry $62.5 $61.1 $45.9
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Life Sciences $19.5 $9.6 $10.2
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Service and Components $34.3 $34.4 $31.4
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Sales by Geography
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North America $54.2 $44.1 $59.1
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Europe $62.3 $60.8 $52.7
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Asia-Pacific $37.5 $46.7 $36.8
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Bookings
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Total $140.4 $150.5 $136.2
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Book-to-bill ratio 0.91 0.99 0.92
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Backlog - total $296.0 $309.6 $298.2
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Backlog - Service and Components $64.8 $65.1 $57.5
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Bookings by Market Segment
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Electronics $27.6 $50.0 $45.1
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Research & Industry $57.1 $39.2 $40.8
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Life Sciences $21.7 $16.5 $18.0
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Service and Components $34.0 $44.8 $32.3
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Balance Sheet Highlights
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Cash, equivalents, investments,
restricted cash $290.8 $436.8 $445.5
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Operating cash generated (used) ($0.3) ($2.2) $4.1
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Accounts receivable $173.0 $184.1 $169.5
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Days sales outstanding (DSO) 102 111 104
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Inventory turnover 2.4 2.5 3.0
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Inventories $157.8 $156.0 $123.8
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Property, plant and equipment $76.2 $74.9 $62.5
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Fixed asset investment (during quarter) $2.3 $5.3 $3.1
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Depreciation expense $4.3 $4.1 $3.3
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Current liabilities $162.3 $328.5 $179.6
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Working capital $361.8 $342.5 $581.2
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Shareholders' equity $521.5 $512.1 $427.3
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Headcount (permanent and temporary) 1,804 1,857 1,773
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SOURCE: FEI Company FEI Company
Fletcher Chamberlin, Investor Relations, 503-726-7710
fletcher.chamberlin@fei.com
Copyright Business Wire 2008
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