Margins and EPS Improve
Aug. 5, 2010 (GlobeNewswire) --HILLSBORO, Ore., Aug. 5, 2010 (GLOBE NEWSWIRE) -- FEI Company (Nasdaq:FEIC) reported record second-quarter net bookings and improved gross margins compared with the first quarter of 2010 and the second quarter of 2009. Net income on the basis of accounting principles generally accepted in the United States (GAAP) was $16.2 million or $0.40 per diluted share, compared with $4.1 million or $0.11 per diluted share in the first quarter of 2010 and $3.7 million or $0.10 per diluted share in the second quarter of 2009. Net income in the latest quarter was increased by a significant tax benefit and reduced by restructuring expenses. Excluding those items, both operating and net income were up substantially compared with the first quarter of this year and the prior year's second quarter.
This press release reports FEI's results on a GAAP basis as well as on a non-GAAP basis which excludes certain items. Management's reasons for presenting non-GAAP information are outlined later in the release, and a reconciliation of GAAP and non-GAAP results is attached in a table.
For the second quarter, net bookings were $175.1 million, up 4% from the first quarter of 2010 and up 11% from last year's second quarter. Net bookings for the latest quarter include a downward adjustment of the backlog of $9.9 million due to currency movements. The backlog at the end of the quarter was a record $402.5 million. The book-to-bill ratio for the quarter was 1.20 to 1.
Net sales of $146.0 million were down 2% compared to $149.1 million in the first quarter of 2010 and up 4% from $140.3 million in the second quarter of 2009. Changes in foreign currency rates, principally a weaker Euro, reduced revenue by $5.0 million compared to the average rates in the first quarter of 2010.
Net income in the second quarter of 2010 was reduced by restructuring expenses of $9.1 million, primarily related to previously-announced severance costs and the company's move of a portion of its manufacturing operations from the Netherlands to the Czech Republic. Net income also included a net tax benefit of $13.5 million due to the company's previously announced Advanced Pricing Agreement between the Dutch and U.S. taxing authorities. Excluding restructuring expenses from the latest quarter and assuming a normalized tax rate of 27%, non-GAAP net earnings for the quarter would have been $8.5 million or $0.22 per diluted share.
Cash flow from operations in the quarter was positive $25.1 million and gross cash, investments and restricted cash, net of debt, increased by $23.9 million in the quarter.
"At 41.0%, our gross margin was up compared with the first quarter and last year's second quarter," said Don Kania, president and CEO of FEI, "and operating expenses were down. Non-GAAP earnings were up significantly, paced by revenue growth in Electronics and a favorable currency environment.
"Bookings were again strong, and have averaged nearly $169 million for the last three quarters," Kania continued. "We enter the second half with a record backlog, a solid order outlook and plans for expanded production and increased revenue."
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 and the reconciliation of GAAP and non-GAAP results.
Guidance for Q3 2010
Assuming a euro exchange rate of $1.30, FEI expects net sales in the third quarter of 2010 to be in the range of $150 million to $155 million. Bookings are expected to be at least $165 million. GAAP earnings per share are expected to be in the range of $0.22 to $0.26. Non-GAAP earnings per share exclusive of restructuring charges are expected to be in the range of $0.23 to $0.27. Restructuring charges are estimated to be approximately $700,000 or $0.01 per share in the quarter.
Non-GAAP Financial Information
This press release presents financial information for the second quarter and guidance for the third quarter of 2010 that includes non-GAAP financial measures that exclude certain restructuring expenses and a significant one-time tax benefit. FEI management believes that providing this non-GAAP information is helpful to investors to better understand the company's core operating performance and comparisons to periods that do not include large restructuring charges or tax benefits. There are, however, limitations in using non-GAAP financial measures. Because they are not prepared in accordance with GAAP they may be different from non-GAAP financial measures used by other companies, thereby making comparisons more difficult. In addition, non-GAAP financial measures may be limited in value because they exclude certain cash and non-cash items that may have a material impact on the company's financial results. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the most directly comparable GAAP financial measures. The company's non-GAAP results and forecast should be viewed in conjunction with its GAAP earnings forecast and other financial forecasts and financial information.
Investor Conference Call -- 2:00 p.m. Pacific time, Thursday, August 5, 2010
Parties interested in listening to FEI's quarterly conference call may do so by dialing 1-877-941-6009 (U.S., toll-free) or 1-480-629-9770 (international), with the conference title: FEI Second Quarter Earnings Call, Conference ID 4330802. 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 1-800-406-7325 (US) or 1-303-590-3030 (international) and entering the access code 4330802#.
About FEI
FEI (Nasdaq:FEIC) is a leading diversified scientific instruments company. It is a premier provider of electron and ion-beam microscopes and tools for nanoscale applications globally and across many industries: industrial and academic materials research, life sciences, semiconductors, data storage, natural resources and more. With a history of over 60 years of technological innovation and leadership, FEI has set the performance standard in transmission electron microscopes (TEM), scanning electron microscopes (SEM) and DualBeams™, which combine a SEM with a focused ion beam (FIB). FEI's imaging systems provide 3D characterization, analysis and modification/prototyping with resolutions down to the sub-Angstrom (one-tenth of a nanometer) level. FEI has approximately 1,800 employees and sales and service operations in more than 50 countries around the world. More information can be found at: www.fei.com.
The FEI Company logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6379
Safe Harbor Statement
This news release contains forward-looking statements that include our guidance for the third quarter of 2010 and future periods; the expected shipment of our backlog; expectations about operating expenses and restructuring expense; expectations for future bookings; expectations about gross margins; expectations about foreign currency rates; expected tax benefits and rates; and expectations for product sales and production, and performance of certain market segments. Factors that could affect these forward-looking statements include, but are not limited to, the global economic environment; the timing, size, execution and ultimate success of government stimulus programs; lower than expected customer orders and the potential weakness of the Research & Industry, Electronics and Life Sciences market segments; bankruptcy or insolvency of customers or suppliers; cyclical changes in the data storage and semiconductor industries, which are the major components of Electronics market revenue; fluctuations in foreign exchange, interest and tax rates; changes in tax rate and laws, accounting rules regarding taxes or agreements with tax authorities; the ongoing determination of the effectiveness of foreign exchange hedge transactions; 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 cost reductions and other improvements from restructuring plans; risks associated with shipping a high percentage of the company's quarterly revenue in the last month of the quarter; 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 new product introduction and the inability to manufacture products in required volumes; inability to deploy products as expected or delays in shipping products due to technical problems or barriers; potential shipment or supply chain disruptions due to natural disasters or terrorist attacks; shipment delays due to other supply chain problems; changes to or 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; 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) | |||
| July 4, | April 4, | December 31, | |
| ASSETS | 2010 | 2010 | 2009 |
| -- | -- | -- | |
| CURRENT ASSETS: | |||
| Cash and cash equivalents | $ 207,904 | $ 143,546 | $ 124,199 |
| Short-term investments in marketable securities | 110,846 | 190,628 | 212,119 |
| Short-term restricted cash | 11,899 | 11,191 | 17,141 |
| Receivables, net | 153,239 | 160,719 | 152,601 |
| Inventories, net | 131,928 | 132,092 | 138,242 |
| Deferred tax assets | 15,402 | 2,839 | 2,734 |
| Other current assets | 41,337 | 47,933 | 39,470 |
| Total current assets | 672,555 | 688,948 | 686,506 |
| Non-current investments in marketable securities | 12,244 | 24,451 | 39,662 |
| Long-term restricted cash | 32,596 | 38,188 | 35,901 |
| Non-current inventories | 41,713 | 43,036 | 44,385 |
| Property plant and equipment, net | 74,899 | 79,615 | 81,893 |
| Goodwill | 44,764 | 44,809 | 44,615 |
| Deferred tax assets | 6,938 | 3,711 | 3,369 |
| Other assets, net | 13,764 | 14,650 | 17,638 |
| TOTAL | $ 899,473 | $ 937,408 | $ 953,969 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| CURRENT LIABILITIES: | |||
| Accounts payable | $ 41,089 | $ 39,600 | $ 40,587 |
| Accrued liabilities | 36,976 | 34,348 | 36,434 |
| Deferred revenue | 68,795 | 70,318 | 65,805 |
| Income taxes payable | 6,112 | 3,859 | 1,321 |
| Accrued restructuring, reorganization and relocation | 7,337 | 30 | 32 |
| Short-term line of credit | -- | 47,250 | 59,600 |
| Other current liabilities | 30,261 | 46,273 | 47,693 |
| Total current liabilities | 190,570 | 241,678 | 251,472 |
| Convertible debt | 90,860 | 100,000 | 100,000 |
| Other liabilities | 40,077 | 32,906 | 34,973 |
| SHAREHOLDERS' EQUITY: | |||
| Preferred stock - 500 shares authorized; none issued and outstanding | -- | -- | -- |
| Common stock - 70,000 shares authorized; 38,142, 37,921, and 37,859 shares | |||
| issued and outstanding at April 4, 2010, December 31, 2009, and April 5, 2009 | 506,846 | 488,385 | 485,557 |
| Retained earnings (deficit) | 41,761 | 25,580 | 21,476 |
| Accumulated other comprehensive income | 29,359 | 48,859 | 60,491 |
| Total shareholders' equity | 577,966 | 562,824 | 567,524 |
| TOTAL | $ 899,473 | $ 937,408 | $ 953,969 |
| FEI Company and Subsidiaries | |||||
| Consolidated Statements of Operations | |||||
| (In thousands, except per share amounts) | |||||
| (Unaudited) | |||||
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | ||||
| July 4, | April 4, | July 5, | July 4, | July 5, | |
| 2010 | 2010 | 2009 | 2010 | 2009 | |
| NET SALES: | |||||
| Products | $ 108,931 | $ 111,877 | $ 107,162 | $ 220,808 | $ 215,724 |
| Service and components | 37,117 | 37,222 | 33,101 | 74,339 | 66,372 |
| Total net sales | 146,048 | 149,099 | 140,263 | 295,147 | 282,096 |
| COST OF SALES: | |||||
| Products | 62,068 | 64,688 | 61,127 | 126,756 | 121,014 |
| Service and components | 24,172 | 25,206 | 22,975 | 49,378 | 46,229 |
| Total cost of sales | 86,240 | 89,894 | 84,102 | 176,134 | 167,243 |
| Gross profit | 59,808 | 59,205 | 56,161 | 119,013 | 114,853 |
| OPERATING EXPENSES: | |||||
| Research and development | 15,616 | 17,132 | 16,657 | 32,748 | 33,437 |
| Selling, general and administrative | 31,604 | 35,575 | 31,825 | 67,179 | 64,651 |
| Restructuring, reorganization and relocation | 9,055 | 914 | 1,067 | 9,969 | 2,029 |
| Total operating expenses | 56,275 | 53,621 | 49,549 | 109,896 | 100,117 |
| OPERATING INCOME | 3,533 | 5,584 | 6,612 | 9,117 | 14,736 |
| OTHER INCOME (EXPENSE): | |||||
| Interest income | 733 | 991 | 668 | 1,724 | 1,801 |
| Interest expense | (1,303) | (1,218) | (1,195) | (2,521) | (3,107) |
| Other, net | (330) | (409) | (974) | (739) | (515) |
| Total other (expense), net | (900) | (636) | (1,501) | (1,536) | (1,821) |
| INCOME BEFORE TAXES | 2,633 | 4,948 | 5,111 | 7,581 | 12,915 |
| INCOME TAX EXPENSE (BENEFIT) | (13,547) | 844 | 1,451 | (12,703) | 2,917 |
| NET INCOME | $ 16,180 | $ 4,104 | $ 3,660 | $ 20,284 | $ 9,998 |
| BASIC NET INCOME PER SHARE DATA: | $ 0.43 | $ 0.11 | $ 0.10 | $ 0.53 | $ 0.27 |
| DILUTED NET INCOME PER SHARE DATA: | $ 0.40 | $ 0.11 | $ 0.10 | $ 0.51 | $ 0.27 |
| WEIGHTED AVERAGE SHARES OUTSTANDING: | |||||
| Basic | 38,046 | 37,891 | 37,450 | 37,968 | 37,386 |
| Diluted | 41,813 | 38,308 | 37,745 | 41,775 | 37,681 |
| FEI Company and Subsidiaries | |||||||||||
| Consolidated Statements of Operations | |||||||||||
| (Unaudited) | |||||||||||
| Thirteen Weeks Ended (1) | Twenty-Six Weeks Ended (1) | ||||||||||
| July 4, | April 4, | July 5, | July 4, | July 5, | |||||||
| 2010 | 2010 | 2009 | 2010 | 2009 | |||||||
| NET SALES: | |||||||||||
| Products | 74.6% | 75.0% | 76.4% | 74.8% | 76.5% | ||||||
| Service and components | 25.4% | 25.0% | 23.6% | 25.2% | 23.5% | ||||||
| Total net sales | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | ||||||
| COST OF SALES: | |||||||||||
| Products | 42.5% | 43.4% | 43.6% | 42.9% | 42.9% | ||||||
| Service and components | 16.6% | 16.9% | 16.4% | 16.7% | 16.4% | ||||||
| Total cost of sales | 59.0% | 60.3% | 60.0% | 59.7% | 59.3% | ||||||
| Gross profit | 41.0% | 39.7% | 40.0% | 40.3% | 40.7% | ||||||
| OPERATING EXPENSES: | |||||||||||
| Research and development | 10.7% | 11.5% | 11.9% | 11.1% | 11.9% | ||||||
| Selling, general and administrative | 21.6% | 23.9% | 22.7% | 22.8% | 22.9% | ||||||
| Restructuring, reorganization and relocation | 6.2% | 0.6% | 0.8% | 3.4% | 0.7% | ||||||
| Total operating expenses | 38.5% | 36.0% | 35.3% | 37.2% | 35.5% | ||||||
| OPERATING INCOME | 2.4% | 3.7% | 4.7% | 3.1% | 5.2% | ||||||
| OTHER INCOME (EXPENSE): | |||||||||||
| Interest income | 0.5% | 0.7% | 0.5% | 0.6% | 0.6% | ||||||
| Interest expense | -0.9% | -0.8% | -0.9% | -0.9% | -1.1% | ||||||
| Other, net | -0.2% | -0.3% | -0.7% | -0.3% | -0.2% | ||||||
| Total other (expense), net | -0.6% | -0.4% | -1.1% | -0.5% | -0.6% | ||||||
| INCOME BEFORE TAXES | 1.8% | 3.3% | 3.6% | 2.6% | 4.6% | ||||||
| INCOME TAX EXPENSE (BENEFIT) | -9.3% | 0.6% | 1.0% | -4.3% | 1.0% | ||||||
| NET INCOME | 11.1% | 2.8% | 2.6% | 6.9% | 3.5% | ||||||
| (1) Percentages may not add due to rounding. | |||||||||||
| GAAP to non-GAAP reconciliation | ||
| Unaudited (in $000) | ||
| Reconciliation of Q2'10 non-GAAP earnings to GAAP: | ||
| $ | EPS | |
| Non-GAAP net income | 8,532 | $ 0.22 |
| Tax benefit for APA net of tax expense at normalized rate ** | 16,703 | $ 0.40 |
| Restructuring expenses | (9,055) | $ (0.22) |
| GAAP net income and diluted net income per share | 16,180 | $ 0.40 |
| Line item impact: | ||
| Q2 '10 as reported | Q2 '10 non-GAAP | |
| Revenue | 146,048 | 146,048 |
| Cost of sales | 86,240 | 86,240 |
| Gross margin | 59,808 | 59,808 |
| gross margin % | 41.0% | 41.0% |
| R&D, selling and G&A expenses | 47,220 | 47,220 |
| Restructuring * | 9,055 | -- |
| Total operating expenses | 56,275 | 47,220 |
| Operating income | 3,533 | 12,588 |
| operating income % | 2.4% | 8.6% |
| Non-operating expense (net) | (900) | (900) |
| Pretax income | 2,633 | 11,688 |
| Income tax expense (benefit)** | (13,547) | 3,156 |
| Net income | 16,180 | 8,532 |
| Diluted net income per share | $ 0.40 | $ 0.22 |
| Share count used in EPS | ||
| Basic | 38,046 | 38,046 |
| Diluted | 41,813 | 41,813 |
| * Restructuring expenses relate primarily to severance charges in the quarter | ||
| ** Non-GAAP EPS computed using a normalized tax rate of 27% | ||
| Reconciliation of Q3'10 non-GAAP EPS Guidance to GAAP: | ||
| $ | EPS | |
| Non-GAAP EPS | $ 0.23- 0.27 | |
| Restructuring | 700 | $ (0.01) |
| GAAP EPS | 700 | $ 0.22- 0.26 |
| FEI COMPANY | |||||
| Supplemental Data Table | |||||
| ($ in millions, except per share amounts) | |||||
| (Unaudited) | |||||
| Q2 Ended | Q1 Ended | Q2 Ended | |||
| 4-Jul-2010 | 4-Apr-2010 | 5-Jul-09 | |||
| Income Statement Highlights | |||||
| Consolidated sales | $146.0 | $149.1 | $140.3 | ||
| Gross margin | 41.0% | 39.7% | 40.0% | ||
| Stock compensation expense - TOTAL | $2.7 | $2.8 | $2.7 | ||
| Net income | $16.2 | $4.1 | $3.7 | ||
| Diluted net income per share | $0.40 | $0.11 | $0.10 | ||
| Interest income add back included in the calculation of diluted EPS | $0.6 | $0.0 | $0.0 | ||
| Sales by Market Segment | |||||
| Electronics | $56.9 | $41.3 | $32.3 | ||
| Research & Industry | $37.4 | $46.5 | $55.3 | ||
| Life Sciences | $14.6 | $24.1 | $19.6 | ||
| Service and Components | $37.1 | $37.2 | $33.1 | ||
| Sales by Geography | |||||
| USA & Canada | $46.1 | $46.2 | $40.4 | ||
| Europe | $45.7 | $45.5 | $60.6 | ||
| Asia-Pacific and Rest of World | $54.2 | $57.4 | $39.3 | ||
| Gross Margin by Market Segment | |||||
| Electronics | 49.0% | 45.1% | 48.3% | ||
| Research & Industry | 37.4% | 39.9% | 39.9% | ||
| Life Sciences | 34.0% | 41.6% | 42.8% | ||
| Service and Components | 34.9% | 32.3% | 30.6% | ||
| Bookings | |||||
| Total | $175.1 | $167.9 | $157.8 | ||
| Book-to-bill ratio | 1.20 | 1.13 | 1.13 | ||
| Backlog - total | $402.5 | $373.4 | $336.9 | ||
| Backlog - Service and Components | $81.2 | $82.7 | $64.1 | ||
| Bookings by Market Segment | |||||
| Electronics | $71.6 | $56.4 | $35.1 | ||
| Research & Industry | $40.4 | $41.9 | $57.4 | ||
| Life Sciences | $27.5 | $17.7 | $30.6 | ||
| Service and Components | $35.6 | $51.9 | $34.7 | ||
| Bookings by Geography | |||||
| USA & Canada | $57.6 | $54.3 | $40.9 | ||
| Europe | $47.8 | $49.7 | $60.2 | ||
| Asia-Pacific and Rest of World | $69.7 | $63.9 | $56.7 | ||
| Balance Sheet Highlights | |||||
| Cash, equivalents, investments, restricted cash | $375.5 | $408.0 | $384.0 | ||
| Operating cash generated (used) | $25.1 | $2.3 | $9.3 | ||
| Accounts receivable | $153.2 | $160.7 | $162.8 | ||
| Days sales outstanding (DSO) | 96 | 98 | 106 | ||
| Inventory turnover | 2.6 | 2.7 | 2.3 | ||
| Fixed asset investment (during quarter) | $1.8 | $2.6 | $2.4 | ||
| Depreciation expense | $4.2 | $4.3 | $4.2 | ||
| Working capital | $482.0 | $447.3 | $444.2 | ||
| Headcount (permanent and temporary) | 1,791 | 1,789 | 1,770 | ||
| Euro quarterly average rate | 1.281 | 1.385 | 1.361 | ||
| Euro ending rate | 1.258 | 1.359 | 1.399 | ||
CONTACT: FEI Company
Fletcher Chamberlin, Treasurer & Communications Director
(503) 726-7710
fletcher.chamberlin@fei.com
