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Home > Press > FEI Reports Sequential Increase in Fourth Quarter Sales and Net Income: Earnings Per Share Grew from $0.11 in Q3 to $0.20 in Q4

Abstract:
FEI Company (NASDAQ:FEIC) reported growth in sales for the fourth quarter of 2008 from both the third quarter and the comparable quarter a year ago. Sales for the quarter were also the second highest in the company's history. Operating income was the highest in five quarters and net income was up 86% over the third-quarter levels. Revenue and net income were above guidance, as well as bookings (consistent with the company's previous announcement).

FEI Reports Sequential Increase in Fourth Quarter Sales and Net Income: Earnings Per Share Grew from $0.11 in Q3 to $0.20 in Q4

Hillsboro, OR | Posted on February 5th, 2009

Net sales for the quarter ended December 31, 2008 of $151.7 million were up 7% compared to the third quarter of 2008 and up 1% compared to the fourth quarter of 2007. Gross new bookings were $181.8 million before $20.4 million of currency revaluation of the backlog and $7.6 million of cancellations. Net bookings in the quarter totaled $153.8 million compared with a record $175.3 million in the third quarter of 2008 and $156.3 million for the fourth quarter of 2007. The backlog at the end of the quarter was $330.5 million, the highest in the company's history. Approximately 90% of the backlog is expected to ship in the next 12 months.

Operating income for the fourth quarter of 2008 was $11.2 million, compared with $6.2 million in the third quarter of 2008 and $7.4 million in last year's fourth quarter. Restructuring expenses in the latest quarter reduced operating income by $0.8 million or $0.02 per diluted share. Net income for the fourth quarter of 2008 was $7.3 million, compared with $3.9 million in the third quarter of 2008 and $15.9 million in last year's fourth quarter (which included a $4.3 million tax benefit, equal to $0.09 per share). Diluted earnings per share in the latest quarter was $0.20, compared with $0.11 in the third quarter of 2008 and $0.37 in the fourth quarter of 2007. Total cash and investments increased by $5.3 million in the quarter to $319.3 million, and operating cash flow was positive $25.1 million for the quarter.

For the full year 2008, bookings were $620.0 million, up 4% from 2007. Revenue was $599.2 million, up 1% from 2007. Both were records. Net income for 2008 was $24.3 million or $0.61 per share, compared with $58.3 million, or $1.36 per share in 2007. Operating cash flow for the year was $54.9 million, compared with $51.5 million in 2007.

"We had a good quarter," said Don Kania, president and CEO of FEI. "Our Research & Industry segment registered the highest bookings quarter in its history, as customers worldwide continued their investment in nanotechnology centers and our best-in-class tools. Our Life Sciences segment completed the year with 31% annual bookings growth, and we are investing for further growth in this area. Electronics bookings were down as expected due to market weakness.

"Despite the stronger dollar, which reduces our revenues, sales were the second-highest in our history," continued Kania. "Higher operating margins resulted from the beneficial impact of restructuring and the stronger dollar. For the first quarter, a seasonally weak quarter, revenue will be moderated if the U.S. dollar remains strong. We continue to target sequential margin improvement due to higher-margin new products, more favorable foreign exchange rates and the impact of our restructuring program. The Electronics market is likely to remain weak in the quarter, while the outlook for the Research & Industry and Life Sciences markets remains positive."

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 Q1 2009

Assuming an average euro/dollar exchange rate of $1.35, FEI expects net sales in the first quarter of 2009 to be in the range of $135 million to $142 million. Bookings are expected to be above $130 million. GAAP earnings per share are expected to be in the range of $0.10 to $0.15, assuming a 25% tax rate and restructuring charges estimated at $1 million.

Investor Conference Call -- 2:00 p.m. PST Thursday, February 5, 2009

Parties interested in listening to FEI's quarterly conference call may do so by dialing 1-800-218-0713 (domestic, toll-free) or 1-303-228-2960 (international) and asking for the FEI Fourth 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 11125543#.

####

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-Ångström 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 first quarter of 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; expectations about foreign currency rates; government commitments to continued spending for science and technology; expected tax rates; the impact of our restructuring program; expected margin improvement; global macro-economic trends; 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; bankruptcy or insolvency of customers or suppliers; 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)
     
December 31, September 28, December 31,
ASSETS 2008 2008 2007
CURRENT ASSETS:
Cash and cash equivalents $ 146,521 $ 131,956 $ 280,593
Short-term investments in marketable securities 32,901 41,455 152,041
Short-term restricted cash 10,994 17,947 20,984
Receivables 139,733 152,272 157,120
Inventories 141,609 149,899 138,762
Deferred tax assets 2,884 3,499 4,788
Other current assets   32,926   34,331   36,273
 

Total current assets

507,568 531,359 790,561
 
Non-current investments in marketable securities 94,098 101,287 12,758
 
Long-term restricted cash 34,833 21,383 24,621
 
Non-current inventories 41,072 42,274 42,168
 
Property plant and equipment, net 76,991 76,690 74,700
 
Purchased technology, net 1,295 1,502 2,862
 
Goodwill 40,964 40,866 40,864
 
Deferred tax assets 2,188 2,460 2,641
 
Other assets, net   33,163   16,857   16,834
 
TOTAL $ 832,172 $ 834,678 $ 1,008,009
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
CURRENT LIABILITIES:
Accounts payable $ 34,964 $ 38,420 $ 31,156
Accrued payroll liabilities 19,219 20,769 26,833
Accrued warranty reserves 6,439 6,485 6,585
Accrued agent commissions 9,882 9,414 8,401
Deferred revenue 44,135 44,048 60,681
Income taxes payable 3,040 3,843 3,106
Accrued restructuring, reorganization and relocation 240 641 580
Current portion of convertible debt 0 0 195,882
Other current liabilities   33,732   34,748   29,266
 
Total current liabilities $ 151,651 158,368 362,490
 
Convertible debt 115,000 115,000 115,000
 
Deferred tax liabilities 4,164 4,526 4,479
 
Other liabilities 42,268 47,310 38,646
 
SHAREHOLDERS’ EQUITY:
Preferred stock - 500 shares authorized; none issued and outstanding - - -

Common stock - 70,000 shares authorized; 37,286, 37,126, and 36,405, shares issued and outstanding at December 31, 2008, September 28, 2008, and December 31, 2007

418,025 412,800 395,904
Retained earnings 50,700 43,351 26,398
Accumulated other comprehensive income   50,364   53,323   65,092
 
Total shareholders’ equity   519,089   509,474   487,394
 
TOTAL $ 832,172 $ 834,678 $ 1,008,009
FEI Company and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
         
Thirteen Weeks Ended Year Ended
December 31, September 28, December 31, December 31, December 31,
2008 2008 2007 2008 2007
NET SALES:
Products $ 117,903 $ 106,631 $ 117,938 $ 461,506 $ 465,088
Service and components   33,823     35,137     32,270     137,673     127,422  
Total net sales   151,726     141,768     150,208     599,179     592,510  
 
COST OF SALES:
Products 67,791 60,385 65,995 265,543 252,546
Service and components   23,941     24,681     24,525     99,095     93,544  
Total cost of sales   91,732     85,066     90,520     364,638     346,090  
 
Gross profit   59,994     56,702     59,688     234,541     246,420  
 
OPERATING EXPENSES:
Research and development 16,907 17,168 18,159 70,378 66,042
Selling, general and administrative 30,656 31,685 33,499 126,960 124,160
Amortization of purchased technology 441 455 450 1,808 1,777
Restructuring, reorganization and relocation   820     1,176     132     4,267     (272 )
Total operating expenses   48,824     50,484     52,240     203,413     191,707  
 
OPERATING INCOME   11,170     6,218     7,448     31,128     54,713  
 
OTHER INCOME (EXPENSE):
Interest income 2,535 2,710 6,498 14,362 22,372
Interest expense (1,736 ) (1,689 ) (2,444 ) (7,906 ) (8,735 )
Gain on investment disposals and impairment, net - - - - 1,167
Other expense, net   (1,818 )   (1,612 )   (230 )   (4,670 )   (3,492 )

Total other income (expense), net

  (1,019 )   (591 )   3,824     1,786     11,312  
 
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 10,151 5,627 11,272 32,914 66,025
 
INCOME TAX EXPENSE   2,802     1,679     (4,331 )   8,612     8,077  
 
INCOME FROM CONTINUING OPERATIONS 7,349 3,948 15,603 24,302 57,948
 
DISCONTINUED OPERATIONS:
Gain (loss) from discontinued operations - - - - -
Gain on disposal, net of income taxes   -     -     263     -     390  
INCOME FROM DISCONTINUED OPERATIONS   -     -     263     -     390  
 
NET INCOME $ 7,349   $ 3,948   $ 15,866   $ 24,302   $ 58,338  
 
BASIC NET INCOME PER SHARE DATA:
From continuing operations $ 0.20   $ 0.11   $ 0.43   $ 0.66   $ 1.62  
From discontinued operations $ 0.00   $ 0.00   $ 0.01   $ 0.00   $ 0.01  
 
DILUTED NET INCOME PER SHARE DATA:
From continuing operations $ 0.20   $ 0.11   $ 0.36   $ 0.61   $ 1.35  
From discontinued operations $ 0.00   $ 0.00   $ 0.01   $ 0.00   $ 0.01  
 
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic   37,183     36,780     36,323     36,766     35,709  
Diluted   37,446     37,306     46,477     40,546     46,254  
FEI Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
         
Thirteen Weeks Ended (1) Year Ended (1)
December 31, September, 28 December 31, December 31, December 31,
2008 2008 2007 2008 2007
NET SALES:
Products 77.7 % 75.2 % 78.5 % 77.0 % 78.5 %
Service and components 22.3 % 24.8 % 21.5 % 23.0 % 21.5 %

Total net sales

100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
 
COST OF SALES:
Products 44.7 % 42.6 % 43.9 % 44.3 % 42.6 %
Service and components 15.8 % 17.4 % 16.3 % 16.5 % 15.8 %
Total cost of sales 60.5 % 60.0 % 60.3 % 60.9 % 58.4 %
 
Gross profit 39.5 % 40.0 % 39.7 % 39.1 % 41.6 %
 
OPERATING EXPENSES:
Research and development 11.1 % 12.1 % 12.1 % 11.7 % 11.1 %
Selling, general and administrative 20.2 % 22.3 % 22.3 % 21.2 % 21.0 %
Amortization of purchased technology 0.3 % 0.3 % 0.3 % 0.3 % 0.3 %
Restructuring, reorganization and relocation 0.5 % 0.8 % 0.1 % 0.7 % 0.0 %
Total operating expenses 32.2 % 35.6 % 34.8 % 33.9 % 32.4 %
 
OPERATING INCOME 7.4 % 4.4 % 5.0 % 5.2 % 9.2 %
 
OTHER INCOME (EXPENSE):
Interest income 1.7 % 1.9 % 4.3 % 2.4 % 3.8 %
Interest expense -1.1 % -1.2 % -1.6 % -1.3 % -1.5 %
Gain on investment disposals and impairment, net 0.0 % 0.0 % 0.0 % 0.0 % 0.2 %
Other expense, net -1.2 % -1.1 % -0.2 % -0.8 % -0.6 %
Total other income (expense), net -0.7 % -0.4 % 2.5 % 0.3 % 1.9 %
 
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES 6.7 % 4.0 % 7.5 % 5.5 % 11.1 %
 
INCOME TAX EXPENSE 1.8 % 1.2 % -2.9 % 1.4 % 1.4 %
 
INCOME FROM CONTINUING OPERATIONS 4.8 % 2.8 % 10.4 % 4.1 % 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 % 0.2 % 0.0 % 0.1 %
INCOME FROM DISCONTINUED OPERATIONS 0.0 % 0.0 % 0.2 % 0.0 % 0.1 %
 
NET INCOME 4.8 % 2.8 % 10.6 % 4.1 % 9.8 %
 
(1) Percentages may not add due to rounding.
FEI COMPANY
Supplemental Data Table 1
($ in millions, except per share amounts)
(Unaudited)
             
    Q4 Ended   Q3 Ended   Q4 Ended
    12/31/2008   9/28/2008   12/31/2007
Income Statement Highlights            
Consolidated sales   $ 151.7     $ 141.8     $ 150.2  
Gross margin     39.5 %     40.0 %     39.7 %
R&D spending   $ 16.9     $ 17.2     $ 18.2  
R&D (% of sales)     11.1 %     12.1 %     12.1 %
SG&A   $ 30.7     $ 31.7     $ 33.5  
SG&A (% of sales)     20.2 %     22.3 %     22.3 %
Stock compensation expense - COGS   $ 0.3     $ 0.2     $ 0.4  
Stock compensation expense - R&D   $ 0.3     $ 0.3     $ 0.3  
Stock compensation expense - SG&A   $ 1.8     $ 1.4     $ 1.5  
Net income from continuing operations   $ 7.3     $ 3.9     $ 15.6  
Net income from discontinued operations   $ 0.0     $ 0.0     $ 0.3  
Net income   $ 7.3     $ 3.9     $ 15.9  
Diluted earnings per share from continuing operations   $ 0.20     $ 0.11     $ 0.36  
Diluted earnings per share from discontinued operations   $ 0.00     $ 0.00     $ 0.01  
Interest income add back included in the calculation of diluted EPS   $ 0.0     $ 0.0     $ 1.2  
Sales by Market Segment            
Electronics   $ 32.4     $ 35.4     $ 33.0  
Research & Industry   $ 67.3     $ 47.9     $ 67.8  
Life Sciences   $ 18.2     $ 23.4     $ 17.1  
Service and Components   $ 33.8     $ 35.1     $ 32.3  
Sales by Geography        
North America   $ 54.8     $ 51.4     $ 63.2  
Europe   $ 70.8     $ 57.4     $ 63.8  
Asia-Pacific   $ 26.1     $ 33.0     $ 23.2  
Bookings            
Total   $ 153.8     $ 175.3     $ 156.3  
Book-to-bill ratio     1.01       1.24       1.04  
Backlog - total   $ 330.5     $ 329.5     $ 310.8  
Backlog - Service and Components   $ 57.0     $ 59.8     $ 54.7  
Bookings by Market Segment            
Electronics   $ 22.2     $ 51.2     $ 39.6  
Research & Industry   $ 82.2     $ 68.0     $ 63.2  
Life Sciences   $ 17.3     $ 25.9     $ 24.0  
Service and Components   $ 32.1     $ 30.2     $ 29.5  
Balance Sheet Highlights            
Cash, equivalents, investments, restricted cash   $ 319.3     $ 314.0     $ 491.0  
Operating cash generated (used)   $ 25.1     $ 32.2     $ 34.8  
Accounts receivable   $ 139.7     $ 152.3     $ 157.1  
Days sales outstanding (DSO)     84       98       95  
Inventory turnover     2.5       2.2       2.6  
Inventories   $ 141.6     $ 149.9     $ 138.8  
Property, plant and equipment   $ 77.0     $ 76.7     $ 74.7  
Fixed asset investment (during quarter)   $ 3.5     $ 2.5     $ 7.3  
Depreciation expense   $ 3.9     $ 4.2     $ 3.8  
Current liabilities   $ 151.7     $ 158.4     $ 362.5  
Working capital   $ 355.9     $ 373.0     $ 428.1  
Shareholders’ equity   $ 519.1     $ 509.5     $ 487.4  
Headcount (permanent and temporary)     1,803       1,787       1,866  

For more information, please click here

Contacts:
FEI Company
Treasurer & Communications Director
Fletcher Chamberlin
503-726-7710

Copyright © Business Wire 2009

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