Home > Press > FEI Company Reports Third Quarter Financial Results: Bookings Increase 25% from the Second Quarter to a Record $175.3 million
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Abstract:
FEI Company (NASDAQ:FEIC) reported all-time record bookings in the third quarter. Gross margins and operating income improved compared with the second quarter and GAAP earnings per share of $0.11 exceeded prior guidance.
FEI Company Reports Third Quarter Financial Results: Bookings Increase 25% from the Second Quarter to a Record $175.3 million
Hillsboro, OR | Posted on October 28th, 2008Net sales for the quarter ended September 28, 2008 of $141.8 million were seasonally down 8% compared to the second quarter of 2008 and down 3% compared to the third quarter of 2007. Bookings in the quarter totaled $175.3 million, up 25% compared with $140.4 million in the second quarter of 2008 and up 14% compared $153.3 million for the third quarter of 2007. The backlog at the end of the quarter was $329.5 million, the highest in the company's history. Over 90% of the backlog is expected to ship in the next 12 months.
Operating income for the third quarter of 2008 was $6.2 million, compared with $4.9 million in the second quarter of 2008 and $13.5 million in last year's third quarter. Restructuring expenses in the latest quarter reduced operating income by $1.2 million or $0.03 per diluted share. Net income for the third quarter of 2008 was $3.9 million, compared with $4.9 million in the second quarter of 2008 and $13.4 million in last year's third quarter. Diluted earnings per share in the latest quarter were $0.11, compared with $0.12 in the second quarter of 2008 and $0.31 in the third quarter of 2007. The gross profit margin was 40.0% in the third quarter of 2008, compared with 38.1% in the second quarter of 2008. Cash and investments increased by $23.2 million in the quarter, and operating cash flow was positive $32.2 million.
"Sequentially, bookings increased in all of our markets," said Don Kania, president and CEO of FEI. "Our Research & Industry segment was buoyed by continued global investment in our best-in-class tools, including the largest single order in the company's history. At the same time, our Life Sciences business continues to gain traction with record orders, driven by the success of our new products. Electronics bookings were also strong, as customers invested in technology, as expected.
"Revenue was sequentially down in the quarter, due to expected seasonality and the effects of a stronger dollar," continued Kania. "Sequentially higher margins resulted from improved operations, improved Service margins and the beneficial impact of the stronger dollar. For the fourth quarter, a seasonally strong quarter, revenue will be moderated by the strengthening of the U.S. dollar. We expect sequential margin improvement due to higher-margin new products, foreign exchange and the early impact of our restructuring program. While Electronics orders will weaken in the quarter, the outlook for the Research & Industry and Life Sciences segments of our business remains positive, despite global economic turmoil. We expect to enter 2009 with a substantial backlog."
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 Q4 2008
Assuming an average euro/dollar exchange rate of $1.35, down 11% from the average rate of the third quarter, FEI expects net sales fourth quarter of 2008 to be in the range of $141 million to $148 million. GAAP earnings per share are expected to be in the range of $0.11 to $0.17, assuming a 25% tax rate and restructuring charges estimated at $0.02 to $0.03.
Investor Conference Call -- 2:00 p.m. PDT Tuesday, October 28, 2008
Parties interested in listening to FEI's quarterly conference call may do so by dialing 1-866-250-2351 (domestic, toll-free) or 1-303-262-2211 (international) and asking for the FEI Third 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 11121376#.
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About FEI Company
FEI (Nasdaq: FEIC) is the world leader in pioneering technologies and applications that deliver imaging solutions for 3D characterization, analysis and modification/prototyping with resolutions down to the sub-A...ngstrAm level. Our customers, working in advanced research and manufacturing, are supported by field-experienced applications specialists. They have open access to FEI's prestigious global user network so they can succeed in accelerating nanoscale discovery and contribute to better living through new product commercialization. FEI's NanoPorts in North America, Europe and Asia provide centers of technical excellence where our world-class community of customers and specialists collaborate on the ongoing development of new ideas and innovative solutions. FEI has sales and service operations in more than 50 countries around the world.
Safe Harbor Statement
This news release contains forward-looking statements that include our guidance for the fourth quarter of 2008; the preliminary outlook for 2009; expected demand in our markets; the expected shipment of our backlog; expectations for future bookings and backlog; the impact of foreign exchange rates on our results; expected tax rates; the impact of the planned restructuring; expected margin improvement; and the impact of new products. Factors that could affect these forward-looking statements include, but are not limited to, global economic crisis, the strength and potential weakness of the Research and Industry, Electronics and Life Sciences segments; the potential impact on government funding of technology investments due to global financial system rescue programs; 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; changes in tax rate and laws and accounting rules regarding taxes; 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; 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)
Sept. 28, June 29, Dec. 31,
ASSETS 2008 2008 2007
CURRENT ASSETS:
Cash and cash equivalents $ 131,956 $ 84,467 $ 280,593
Short-term investments in marketable securities 41,455 44,837 152,041
Short-term restricted cash 17,947 19,395 20,984
Receivables 152,272 172,998 157,120
Inventories 149,899 157,763 138,762
Deferred tax assets 3,499 3,524 4,788
Other current assets 34,331 41,171 36,273
Total current assets 531,359 524,155 790,561
Non-current investments in marketable securities 101,287 118,857 12,758
Long-term restricted cash 21,383 23,206 24,621
Non-current inventories 42,274 44,386 42,168
Property plant and equipment, net 76,690 76,173 74,700
Purchased technology, net 1,502 2,034 2,862
Goodwill 40,866 40,839 40,864
Deferred tax assets 2,460 3,359 2,641
Other assets, net 16,857 19,148 16,834
TOTAL $ 834,678 $ 852,157 $ 1,008,009
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 38,420 $ 36,041 $ 31,156
Accrued payroll liabilities 20,769 19,375 26,833
Accrued warranty reserves 6,485 7,159 6,585
Accrued agent commissions 9,414 8,788 8,401
Deferred revenue 44,048 53,567 60,681
Income taxes payable 3,843 6,945 3,106
Accrued restructuring, reorganization and relocation 641 2,149 580
Current portion of convertible debt 0 1,093 195,882
Other current liabilities 34,748 27,201 29,266
Total current liabilities 158,368 162,318 362,490
Convertible debt 115,000 115,000 115,000
Deferred tax liabilities 4,526 5,161 4,479
Other liabilities 47,310 48,216 38,646
SHAREHOLDERS' EQUITY:
Preferred stock - 500 shares authorized; none issued and outstanding - - -
Common stock - 70,000 shares authorized; 37,126, 36,638, and 412,800 401,881 395,904
36,405, shares issued and outstanding at September 28, 2008, June
29, 2008, and December 31, 2007
Retained earnings 43,351 39,403 26,398
Accumulated other comprehensive income 53,323 80,178 65,092
Total shareholders' equity 509,474 521,462 487,394
TOTAL $ 834,678 $ 852,157 $ 1,008,009
FEI Company and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
Sept. 28, June 29, Sept. 30, Sept. 28, Sept. 30,
2008 2008 2007 2008 2007
NET SALES:
Products $ 106,631 $ 119,758 $ 113,565 $ 343,603 $ 347,150
Service and components 35,137 34,281 32,223 103,850 95,152
Total net sales 141,768 154,039 145,788 447,453 442,302
COST OF SALES:
Products 60,385 70,384 61,249 197,752 186,552
Service and components 24,681 25,035 23,307 75,154 69,018
Total cost of sales 85,066 95,419 84,556 272,906 255,570
Gross profit 56,702 58,620 61,232 174,547 186,732
OPERATING EXPENSES:
Research and development 17,168 18,496 16,414 53,471 47,883
Selling, general and administrative 31,685 32,460 30,915 96,304 90,661
Amortization of purchased technology 455 459 444 1,367 1,327
Restructuring, reorganization and relocation 1,176 2,271 - 3,447 (404 )
Total operating expenses 50,484 53,686 47,773 154,589 139,467
OPERATING INCOME 6,218 4,934 13,459 19,958 47,265
OTHER INCOME (EXPENSE):
Interest income 2,710 4,118 5,902 11,827 15,874
Interest expense (1,689 ) (2,250 ) (2,218 ) (6,170 ) (6,291 )
Gain on investment disposals and impairment, net - - 511 - 1,167
Other expense, net (1,612 ) (373 ) (1,034 ) (2,852 ) (3,262 )
Total other income (expense), net (591 ) 1,495 3,161 2,805 7,488
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 5,627 6,429 16,620 22,763 54,753
INCOME TAX EXPENSE 1,679 1,578 3,236 5,810 12,408
INCOME FROM CONTINUING OPERATIONS 3,948 4,851 13,384 16,953 42,345
DISCONTINUED OPERATIONS:
Gain (loss) from discontinued operations - - - - -
Gain on disposal, net of income taxes - - - - 127
INCOME FROM DISCONTINUED OPERATIONS - - - - 127
NET INCOME $ 3,948 $ 4,851 $ 13,384 $ 16,953 $ 42,472
BASIC NET INCOME PER SHARE DATA:
From continuing operations $ 0.11 $ 0.13 $ 0.37 $ 0.46 $ 1.19
From discontinued operations $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.01
DILUTED NET INCOME PER SHARE DATA:
From continuing operations $ 0.11 $ 0.12 $ 0.31 $ 0.44 $ 0.99
From discontinued operations $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.01
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 36,780 36,499 36,216 36,571 35,505
Diluted 37,306 41,509 46,419 40,415 46,066
FEI Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Thirteen Weeks Ended (1) Thirty-Nine Weeks Ended
Sept. 28, June 29, Sept. 30, Sept. 28, Sept. 30,
2008 2008 2007 2008 2007
NET SALES:
Products 75.2 % 77.7 % 77.9 % 76.8 % 78.5 %
Service and components 24.8 % 22.3 % 22.1 % 23.2 % 21.5 %
Total net sales 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
COST OF SALES:
Products 42.6 % 45.7 % 42.0 % 44.2 % 42.2 %
Service and components 17.4 % 16.3 % 16.0 % 16.8 % 15.6 %
Total cost of sales 60.0 % 61.9 % 58.0 % 61.0 % 57.8 %
Gross profit 40.0 % 38.1 % 42.0 % 39.0 % 42.2 %
OPERATING EXPENSES:
Research and development 12.1 % 12.0 % 11.3 % 12.0 % 10.8 %
Selling, general and administrative 22.3 % 21.1 % 21.2 % 21.5 % 20.5 %
Amortization of purchased technology 0.3 % 0.3 % 0.3 % 0.3 % 0.3 %
Restructuring, reorganization and relocation 0.8 % 1.5 % 0.0 % 0.8 % -0.1 %
Total operating expenses 35.6 % 34.9 % 32.8 % 34.5 % 31.5 %
OPERATING INCOME 4.4 % 3.2 % 9.2 % 4.5 % 10.7 %
OTHER INCOME (EXPENSE):
Interest income 1.9 % 2.7 % 4.0 % 2.6 % 3.6 %
Interest expense -1.2 % -1.5 % -1.5 % -1.4 % -1.4 %
Gain on investment disposals and impairment, net 0.0 % 0.0 % 0.4 % 0.0 % 0.3 %
Other expense, net -1.1 % -0.2 % -0.7 % -0.6 % -0.7 %
Total other income (expense), net -0.4 % 1.0 % 2.2 % 0.6 % 1.7 %
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 4.0 % 4.2 % 11.4 % 5.1 % 12.4 %
INCOME TAX EXPENSE 1.2 % 1.0 % 2.2 % 1.3 % 2.8 %
INCOME FROM CONTINUING OPERATIONS 2.8 % 3.1 % 9.2 % 3.8 % 9.6 %
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 2.8 % 3.1 % 9.2 % 3.8 % 9.6 %
(1) Percentages may not add due to rounding.
FEI COMPANY
Supplemental Data Table 1
($ in millions, except per share amounts)
(Unaudited)
Q3 Ended Q2 Ended Q3 Ended
9/28/2008 6/29/2008 9/30/2007
Income Statement Highlights
Consolidated sales $ 141.8 $ 154.0 $ 145.8
Gross margin 40.0 % 38.1 % 42.0 %
R&D spending $ 17.2 $ 18.5 $ 16.4
R&D (% of sales) 12.1 % 12.0 % 11.3 %
SG&A $ 31.7 $ 32.5 $ 30.9
SG&A (% of sales) 22.3 % 21.1 % 21.2 %
Stock compensation expense - COGS $ 0.2 $ 0.2 $ 0.2
Stock compensation expense - R&D $ 0.3 $ 0.2 $ 0.3
Stock compensation expense - SG&A $ 1.4 $ 1.4 $ 0.7
Net income from continuing operations $ 3.9 $ 4.9 $ 13.4
Net income from discontinued operations $ 0.0 $ 0.0 $ 0.0
Net income $ 3.9 $ 4.9 $ 13.4
Diluted earnings per share from continuing operations $ 0.11 $ 0.12 $ 0.31
Diluted earnings per share from discontinued operations $ 0.00 $ 0.00 $ 0.00
Interest income add back included in the calculation of diluted $ 0.0 $ 0.2 $ 1.2
EPS
Sales by Market Segment
Electronics $ 35.4 $ 37.7 $ 48.1
Research & Industry $ 47.9 $ 62.5 $ 51.6
Life Sciences $ 23.4 $ 19.5 $ 13.9
Service and Components $ 35.1 $ 34.3 $ 32.2
Sales by Geography
North America $ 51.4 $ 54.2 $ 46.5
Europe $ 57.4 $ 62.3 $ 61.5
Asia-Pacific $ 33.0 $ 37.5 $ 37.8
Bookings
Total $ 175.3 $ 140.4 $ 153.3
Book-to-bill ratio 1.24 0.91 1.05
Backlog - total $ 329.5 $ 296.0 $ 305.7
Backlog - Service and Components $ 59.8 $ 64.8 $ 58.5
Bookings by Market Segment
Electronics $ 51.2 $ 27.6 $ 28.8
Research & Industry $ 68.0 $ 57.1 $ 80.2
Life Sciences $ 25.9 $ 21.7 $ 11.2
Service and Components $ 30.2 $ 34.0 $ 33.1
Balance Sheet Highlights
Cash, equivalents, investments, restricted cash $ 314.0 $ 290.8 $ 455.8
Operating cash generated (used) $ 32.2 ($0.3 ) $ 11.4
Accounts receivable $ 152.3 $ 173.0 $ 176.5
Days sales outstanding (DSO) 98 102 110
Inventory turnover 2.2 2.4 2.6
Inventories $ 149.9 $ 157.8 $ 137.2
Property, plant and equipment $ 76.7 $ 76.2 $ 68.1
Fixed asset investment (during quarter) $ 2.5 $ 2.3 $ 5.1
Depreciation expense $ 4.2 $ 4.3 $ 3.4
Current liabilities $ 158.4 $ 162.3 $ 236.3
Working capital $ 373.0 $ 361.8 $ 557.1
Shareholders' equity $ 509.5 $ 521.5 $ 456.7
Headcount (permanent and temporary) 1,787 1,804 1,851
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Contacts:
FEI Company
Investor Relations
Fletcher Chamberlin
503-726-7710
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