FEI Reports Second-Quarter Results

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Bookings of $259.0 Million and Revenue of $237.0 Million

GAAP EPS of $0.59 and Non-GAAP EPS of $0.70

HILLSBORO, Ore., July 30, 2014 (GLOBE NEWSWIRE) -- FEI Company (Nasdaq:FEIC) reported results for second quarter of 2014. Bookings of $259.0 million were the highest for any quarter in the company's history and revenue was the highest ever for a second quarter.

Revenue of $237.0 million was up 6.5% compared to $222.5 million in the second quarter of 2013 and up 4.7% compared to $226.3 million in the first quarter of 2014.

Diluted earnings per share computed on the basis of accounting principles generally accepted in the United States ("GAAP") were $0.59, compared with $0.72 in the second quarter of 2013 and $0.59 in the first quarter of 2014. Net income for the quarter was $24.9 million, compared with $30.0 million in the second quarter of 2013 and $25.1 million in the first quarter of 2014.

Diluted earnings per share computed on a non-GAAP basis were $0.70, compared with $0.72 in the second quarter of 2013 and $0.61 in the first quarter of 2014. Non-GAAP net income for the quarter was $29.7 million, compared with $30.3 million in the second quarter of 2013 and $26.2 million in the first quarter of 2014.

Bookings in the second quarter were at record levels for the company at $259.0 million, up 9.0% compared with bookings of $237.7 million in the second quarter of 2013 and up 4.7% from $247.3 million in the first quarter of 2014. The book-to-bill ratio in the quarter was 1.09-to-1 and the backlog at the end of the quarter was $516.7 million, an increase of $43.1 million since the beginning of 2014.

The gross margin in the second quarter was 46.4%, compared with 48.0% in the second quarter of 2013 and 47.0% in the first quarter of 2014.

"We had another strong quarter of bookings," commented Don Kania, president and CEO, "with a significant recovery and a record total in the Science Group, offset by bookings weakness from Industry customers. Revenue from semiconductor customers in our Industry Group was at record levels, and revenue and earnings overall were within our guidance ranges.

"Looking forward, we expect third quarter revenue similar to the second quarter. Recent bookings momentum and a healthy backlog position the company for a strong fourth quarter."

Total cash, investments and restricted cash at the end of the quarter was $510.2 million, a decrease of $38.5 million from the end of the first quarter. Cash flow provided by operating activities was $16.0 million. During the quarter, the company spent $30.5 million to repurchase 374,000 shares of its common stock, paid cash dividends of $5.1 million and spent $19.0 million on plant and equipment, principally to complete the new leased facility in the Czech Republic.

Outlook

For the third quarter of 2014, revenue is expected to be in the range of $228.0 million to $243.0 million. GAAP earnings per share are expected to be in the range of $0.35 to $0.45. GAAP earnings guidance for the third quarter includes restructuring and costs related to the move to the company's new leased facility in the Czech Republic of approximately $13.0 million to $13.6 million. Non-GAAP earnings per share are expected to be in the range of $0.60 to $0.70. The effective tax rate is expected to be approximately 19%.

Revenue for the full year is now expected to be 5% to 7% greater than 2013.

Non-GAAP Financial Measures

This press release reports FEI's results on a GAAP basis as well as on a non-GAAP basis. Non-GAAP net income, diluted earnings per share, operating expenses, operating income, cost of sales and gross margin exclude certain costs for asset impairments, inventory write-downs and severance related to the company's facilities consolidation and relocation efforts, acceleration of an acquisition-related earn-out provision and related tax impacts. A reconciliation of these charges and benefits along with their impact on net income and earnings per share is included in a table attached to this press release, along with GAAP statements of operations, balance sheets, additional supplementary information and summary cash flow information.

FEI's management uses these non-GAAP financial measures because they exclude items that are generally not directly related to the performance of the company's core business operations and therefore provides useful supplemental information to management and investors regarding the performance of the company's business operations, facilitates comparisons to the company's historical operating results and enhances investors' ability to review FEI's business from the same perspective as FEI's management.

These non-GAAP financial measures are not intended to be used in isolation and should not be considered a substitute for any other performance measure determined in accordance with GAAP. Investors and potential investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool, including that other companies may calculate similar non-GAAP financial measures differently, limiting their usefulness as a comparative tool. The company compensates for these limitations by providing specific information regarding the GAAP amounts included in or excluded from the non-GAAP financial measures. The company further compensates for the limitations of its use of non-GAAP financial measures by presenting comparable GAAP measures more prominently. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures included with this press release with our GAAP net income and net income per diluted share.

Investor Conference Call -- 2:00 p.m. Pacific time, Wednesday, July 30, 2014

Parties interested in listening to FEI's quarterly conference call may do so by dialing 1-888-510-1785 (U.S., toll-free) or +1-719-325-2177 (international and toll), with the conference title: FEI Second Quarter Earnings Call, Conference ID 5370708. A telephone replay of the call will be available at 1-888-203-1112 (U.S., toll-free) or +1-719-457-0820 (international and toll) with the passcode: 5370708. 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.

Safe Harbor Statement

This news release contains forward-looking statements that include guidance for revenue and earnings per share for the third quarter of 2014, revenue growth expectations for 2014 compared with 2013, the impact of certain items on our results for the quarter, and assumptions about tax rates. Forward-looking statements may also be identified by words and phrases that refer to future expectations, such as "guidance", "guiding", "forecast", "toward", "plan", "expect", "expects", "are expected", "is expected", "will", "projecting", "looking forward" and other similar words and phrases. Factors that could affect these forward-looking statements include, but are not limited to: the global economic environment; lower than expected customer orders, including for recently-introduced products; potential weakness of the Science and Industry market segments; potential disruption in manufacturing or unexpected additional costs due to the transition from older to newer products; potential delayed or reduced governmental spending to support expected orders; potential disruption in the company's operations due to organizational changes; cyclical changes in the semiconductor industry, which is a major component of Industry market segment revenue; the relative mix of higher-margin and lower-margin products; potential for increased volatility resulting from larger sales transactions; risks associated with a high percentage of the company's revenue coming from "turns" business, when the order for a product is placed by the customer in the same quarter as the planned shipment, and risks associated with building and shipping a high percentage of the company's quarterly revenue in the last month of the quarter; delays in meeting all accounting requirements for revenue recognition; fluctuations in foreign exchange rates, which can affect margins or the competitive pricing of our products; additional costs related to future merger and acquisition activity; failure of the company to achieve anticipated benefits of acquisitions and collaborations, including failure to achieve financial goals and integrate acquisitions successfully; reduced profitability due to failure to achieve or sustain margin improvement in service or product manufacturing; failure to achieve improved operational efficiency and other benefits from infrastructure investments and restructuring activities; changes to current restructuring activities, including greater than estimated costs, or potential additional restructurings and reorganizations; potential customer cancellations or requests to defer planned shipments; changes in backlog and the timing of shipments from backlog; inability to deploy products as expected or delays in shipping products due to technical problems or barriers, especially with regard to recently introduced TEM products; potential shipment or supply chain disruptions; and additional selling, general and administrative or research and development expenses. 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.

About FEI:

FEI Company (Nasdaq:FEIC) designs, manufactures and supports a broad range of high-performance microscopy workflow solutions that provide images and answers at the micro-, nano- and picometer scales. Its innovation and leadership enable customers in industry and science to increase productivity and make breakthrough discoveries. Headquartered in Hillsboro, Ore., USA, FEI has over 2,600 employees and sales and service operations in more than 50 countries around the world. More information can be found at: www.fei.com.

FEI Company and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 29,
2014
March 30,
2014
December 31,
2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 272,372 $ 317,666 $ 384,170
Short-term investments in marketable securities 125,945 120,832 108,191
Short-term restricted cash 19,176 14,926 18,798
Receivables, net 225,174 206,906 194,418
Inventories, net 195,712 192,551 181,725
Deferred tax assets 10,670 9,884 15,114
Other current assets 35,913 30,089 28,324
Total current assets 884,962 892,854 930,740
Non-current investments in marketable securities 57,643 60,740 47,278
Long-term restricted cash 35,075 34,589 32,718
Non-current inventories 57,326 59,295 62,104
Property plant and equipment, net 171,937 163,447 157,829
Intangible assets, net 65,121 67,637 47,197
Goodwill 184,994 184,260 136,152
Deferred tax assets 7,528 4,261 1,751
Other assets, net 13,668 10,517 10,315
TOTAL $ 1,478,254 $ 1,477,600 $ 1,426,084
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 87,975 $ 94,311 $ 73,247
Accrued liabilities 53,743 47,802 57,851
Deferred revenue 91,033 93,098 91,563
Income taxes payable 8,651 3,135 4,579
Accrued restructuring, reorganization and relocation 1,398 897 50
Other current liabilities 52,331 51,208 46,324
Total current liabilities 295,131 290,451 273,614
Other liabilities 83,703 80,648 74,902
SHAREHOLDERS' EQUITY:
Preferred stock - 500 shares authorized; none issued and outstanding
Common stock - 70,000 shares authorized; 41,961, 42,255 and 42,136 shares issued and outstanding at June 29, 2014, March 30, 2014 and December 31, 2013 626,814 646,531 637,482
Retained earnings 427,307 412,938 392,958
Accumulated other comprehensive income 45,299 47,032 47,128
Total shareholders' equity 1,099,420 1,106,501 1,077,568
TOTAL $ 1,478,254 $ 1,477,600 $ 1,426,084
FEI Company and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 29,
2014
March 30,
2014
June 30,
2013
June 29,
2014
June 30,
2013
NET SALES:
Products $ 179,030 $ 169,298 $ 170,337 $ 348,328 $ 339,832
Service 57,925 56,966 52,141 114,892 103,835
Total net sales 236,955 226,264 222,478 463,220 443,667
COST OF SALES:
Products 92,077 86,595 82,680 178,673 167,863
Service 35,027 33,345 32,901 68,371 66,356
Total cost of sales 127,104 119,940 115,581 247,044 234,219
Gross margin 109,851 106,324 106,897 216,176 209,448
OPERATING EXPENSES:
Research and development 26,221 25,646 25,413 51,866 50,222
Selling, general and administrative 50,587 48,462 42,639 99,050 86,163
Restructuring, reorganization and relocation 2,228 1,331 395 3,559 1,090
Total operating expenses 79,036 75,439 68,447 154,475 137,475
OPERATING INCOME 30,815 30,885 38,450 61,701 71,973
OTHER EXPENSE, NET (806) (270) (1,452) (1,076) (2,957)
INCOME BEFORE TAXES 30,009 30,615 36,998 60,625 69,016
INCOME TAX EXPENSE 5,061 5,537 7,005 10,599 12,222
NET INCOME $ 24,948 $ 25,078 $ 29,993 $ 50,026 $ 56,794
BASIC NET INCOME PER SHARE DATA $ 0.59 $ 0.59 $ 0.76 $ 1.19 $ 1.46
DILUTED NET INCOME PER SHARE DATA $ 0.59 $ 0.59 $ 0.72 $ 1.17 $ 1.36
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 42,080 42,191 39,496 42,135 39,012
Diluted 42,627 42,772 42,281 42,701 42,227
FEI Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Thirteen Weeks Ended (1) Twenty-Six Weeks Ended (1)
June 29,
2014
March 30,
2014
June 30,
2013
June 29,
2014
June 30,
2013
NET SALES:
Products 75.6 % 74.8 % 76.6 % 75.2 % 76.6 %
Service 24.4 25.2 23.4 24.8 23.4
Total net sales 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
COST OF SALES:
Products 38.9 % 38.3 % 37.2 % 38.6 % 37.8 %
Service 14.8 14.7 14.8 14.8 15.0
Total cost of sales 53.6 % 53.0 % 52.0 % 53.3 % 52.8 %
GROSS MARGIN:
Products 48.6 % 48.9 % 51.5 % 48.7 % 50.6 %
Service 39.5 41.5 36.9 40.5 36.1
Gross margin 46.4 47.0 48.0 46.7 47.2
OPERATING EXPENSES:
Research and development 11.1 % 11.3 % 11.4 % 11.2 % 11.3 %
Selling, general and administrative 21.3 21.4 19.2 21.4 19.4
Restructuring, reorganization and relocation 0.9 0.6 0.2 0.8 0.2
Total operating expenses 33.4 % 33.3 % 30.8 % 33.3 % 31.0 %
OPERATING INCOME 13.0 % 13.6 % 17.3 % 13.3 % 16.2 %
OTHER EXPENSE, NET (0.3)% (0.1)% (0.7)% (0.2)% (0.7)%
INCOME BEFORE TAXES 12.7 % 13.5 % 16.6 % 13.1 % 15.6 %
INCOME TAX EXPENSE 2.1 % 2.4 % 3.1 % 2.3 % 2.8 %
NET INCOME 10.5 % 11.1 % 13.5 % 10.8 % 12.8 %
(1) Percentages may not add due to rounding.
FEI Company and Subsidiaries
Non-GAAP Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended (2) Twenty-Six Weeks Ended (2)
June 29, 2014 March 30,
2014
June 30, 2013 June 29, 2014 June 30, 2013
GAAP Gross Margin $ 109,851 $ 106,324 $ 106,897 $ 216,176 $ 209,448
Adjustment for:
Inventory write-off 755 755
Non-GAAP Gross Margin $ 110,606 $ 106,324 $ 106,897 $ 216,931 $ 209,448
GAAP Operating Expenses $ 79,036 $ 75,439 $ 68,447 $ 154,475 $ 137,475
Adjustment for:
Acceleration of acquisition-related earn-out (2,500) (2,500)
Impairment and other asset write-offs (466) (466)
Restructuring activities (2,228) (1,331) (395) (3,559) (1,090)
Non-GAAP Operating Expenses $ 73,842 $ 74,108 $ 68,052 $ 147,950 $ 136,385
GAAP Operating Income $ 30,815 $ 30,885 $ 38,450 $ 61,701 $ 71,973
Adjustment for:
Inventory write-off 755 755
Acceleration of acquisition-related earn-out 2,500 2,500
Impairment and other asset write-offs 466 466
Restructuring activities 2,228 1,331 395 3,559 1,090
Non-GAAP Operating Income $ 36,764 $ 32,216 $ 38,845 $ 68,981 $ 73,063
GAAP Net Income $ 24,948 $ 25,078 $ 29,993 $ 50,026 $ 56,794
Adjustment for:
Inventory write-off, net of tax 607 607
Acceleration of acquisition-related earn-out, net of tax 2,011 2,011
Impairment and other asset write-offs, net of tax 375 375
Restructuring activities, net of tax 1,792 1,081 317 2,863 874
Non-GAAP Net Income $ 29,733 $ 26,159 $ 30,310 $ 55,882 $ 57,668
GAAP Diluted Net Income Per Share $ 0.59 $ 0.59 $ 0.72 $ 1.17 $ 1.36
Adjustment for:
Inventory write-off 0.01 0.01
Acceleration of acquisition-related earn-out 0.05 0.05
Impairment and other asset write-offs 0.01 0.01
Restructuring activities 0.04 0.03 0.01 0.07 0.02
Non-GAAP Diluted Net Income Per Share $ 0.70 $ 0.61 $ 0.72 $ 1.31 $ 1.38
(2) Diluted net income per share amounts may not add due to rounding.
FEI Company and Subsidiaries
Reconciliation of Forward-Looking Non-GAAP Information
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended September 28, 2014
Low Range Guidance High Range Guidance
GAAP Net Income $ 15,000 $ 19,000
Adjustment for:
Restructuring, reorganization and relocation (3) 10,000 10,300
Move and other costs for new facility in Czech Republic 3,000 3,300
Income tax effect of above adjustments (2,470) (2,584)
Non-GAAP Net Income $ 25,530 $ 30,016
GAAP Net Income Per Share $ 0.35 $ 0.45
Non-GAAP Net Income Per Share $ 0.60 $ 0.70
Shares Used in Above Calculations 42,600 42,600
(3) Principally severance costs.
FEI Company and Subsidiaries
Consolidated Summary of Cash Flows
(In thousands)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 29,
2014
June 30,
2013
June 29,
2014
June 30,
2013
Net Income $ 24,948 $ 29,993 $ 50,026 $ 56,794
Depreciation 7,574 5,640 14,640 11,451
Amortization 3,667 2,691 6,864 5,248
Stock-based compensation 5,823 4,348 10,961 8,712
Other changes in working capital (26,036) 14,042 (38,067) 9,323
Net cash provided by operating activities 15,976 56,714 44,424 91,528
Acquisition of property, plant and equipment (18,986) (37,522) (23,322) (42,566)
Payments for acquisitions, net of cash acquired (434) (65,049)
Other investing activities (7,512) 9,094 (31,599) (11,347)
Net cash used in investing activities (26,932) (28,428) (119,970) (53,913)
Dividends paid on common stock (5,071) (3,085) (10,129) (6,164)
Repurchases of common stock (30,479) (30,479)
Other financing activities 2,145 3,005 8,560 7,373
Net cash (used in) provided by financing activities (33,405) (80) (32,048) 1,209
Effect of exchange rate changes (933) 4,189 (4,204) (1,056)
(Decrease) increase in cash and cash equivalents $ (45,294) $ 32,395 $ (111,798) $ 37,768
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes, net $ 6,172 $ 3,548 $ 9,883 $ 6,204
Accrued purchases of plant and equipment 4,619 4,619
FEI Company and Subsidiaries
Supplemental Data Table
($ in millions, except per share amounts)
(Unaudited)
Q2 Ended
June 29, 2014
Q1 Ended
March 30, 2014
Q2 Ended
June 30, 2013
Twenty-Six Weeks
Ended June 29, 2014
Twenty-Six Weeks
Ended June 30, 2013
Income Statement Highlights
Consolidated sales $ 237.0 $ 226.3 $ 222.5 $ 463.2 $ 443.7
Gross margin 46.4 % 47.0 % 48.0 % 46.7 % 47.2 %
Net income $ 24.9 $ 25.1 $ 30.0 $ 50.0 $ 56.8
Diluted net income per share $ 0.59 $ 0.59 $ 0.72 $ 1.17 $ 1.36
Sales and Bookings Highlights
Sales by Segment
Industry Group $ 127.2 $ 106.5 $ 103.7 $ 233.7 $ 202.8
Science Group 109.8 119.8 118.8 229.5 240.9
Sales by Geography
USA & Canada $ 80.5 $ 72.3 $ 61.5 $ 152.7 $ 130.2
Europe 63.6 67.0 70.5 130.6 136.2
Asia-Pacific and Rest of World 92.9 87.0 90.5 179.9 177.3
Gross Margin by Segment
Industry Group 50.4 % 52.7 % 51.9 % 51.5 % 51.4 %
Science Group 41.7 41.9 44.7 41.8 43.6
Bookings and Backlog
Bookings - Total $ 259.0 $ 247.3 $ 237.7 $ 506.3 $ 468.4
Book-to-bill Ratio 1.09 1.09 1.07 1.09 1.06
Backlog - Total $ 516.7 $ 494.6 $ 449.5 $ 516.7 $ 449.5
Backlog - Service 143.5 133.0 120.5 143.5 120.5
Bookings by Segment
Industry Group $ 109.9 $ 123.2 $ 106.9 $ 233.1 $ 211.4
Science Group 149.1 124.1 130.8 273.2 257.0
Bookings by Geography
USA & Canada $ 86.4 $ 58.1 $ 79.2 $ 144.5 $ 134.7
Europe 73.3 92.7 59.1 166.0 123.1
Asia-Pacific and Rest of World 99.3 96.5 99.4 195.8 210.6
Balance Sheet and Other Highlights
Cash, equivalents, investments, restricted cash $ 510.2 $ 548.8 $ 464.3 $ 510.2 $ 464.3
Days sales outstanding (DSO) 87 83 81 87 81
Days in inventory 181 189 197 181 197
Days in payables (DPO) 63 72 46 63 46
Cash Cycle (DSO + Days in Inv - DPO) 205 200 232 205 232
Working capital $ 589.8 $ 602.4 $ 614.5 $ 589.8 $ 614.5
Headcount (permanent and temporary) 2,689 2,636 2,568 2,689 2,568
Euro average rate 1.37 1.37 1.30 1.37 1.31
Euro ending rate 1.36 1.37 1.31 1.36 1.31
Yen average rate 102.18 102.74 98.76 102.46 95.27
Yen ending rate 101.37 102.33 99.03 101.37 99.03

CONTACT: For more information contact: FEI Company Jason Willey Investor Relations Director (503) 726-2533 jason.willey@fei.com

Source:FEI Company