×

FEI Reports Fourth Quarter Results

Revenue of $265.3 Million and Bookings of $261.9 Million

GAAP EPS of $0.79 and Non-GAAP EPS of $0.98

HILLSBORO, Ore., Feb. 4, 2015 (GLOBE NEWSWIRE) -- FEI Company (Nasdaq:FEIC) reported results for the fourth quarter of 2014. Fourth quarter revenue of $265.3 million was in line with the fourth quarter of 2013 and up 16% from $227.8 million for the third quarter of 2014. Movements in foreign exchange rates negatively impacted revenue for the fourth quarter by $9.6 million, as compared with third quarter of 2014 rates.

Net bookings for the fourth quarter were a record $261.9 million, resulting in a book-to-bill ratio of 0.99-to-1. Backlog was $535.6 million, an increase of $62.1 million, or 13%, since the end of 2013. Bookings and backlog for the fourth quarter were negatively impacted by $17.0 million due to revaluation of the backlog for changes in foreign exchange rates. Excluding the impact of foreign exchange revaluations on existing backlog, bookings for the fourth quarter would have been $278.9 million, up 12% compared with the third quarter of 2014.

Diluted earnings per share computed on the basis of accounting principles generally accepted in the United States ("GAAP") were $0.79 for the fourth quarter of 2014, compared with $0.97 for the fourth quarter of 2013 and $0.51 for the third quarter of 2014. Net income for the quarter was $33.4 million compared with $41.3 million for the fourth quarter of 2013 and $21.6 million for the third quarter of 2014. Fourth quarter results include previously announced realignment and other pre-tax charges of $9.5 million, or $0.19 per share, net of taxes.

Diluted earnings per share computed on a non-GAAP basis were $0.98 for the fourth quarter, compared with $0.97 for the fourth quarter of 2013 and $0.69 for the third quarter of 2014. Non-GAAP net income for the quarter was $41.2 million, compared with $41.3 million for the fourth quarter of 2013 and $29.4 million for the third quarter of 2014.

The gross margin for the fourth quarter was 46.5%, compared with 47.7% for the third quarter of 2014, reflecting a higher mix of lower margin Science products shipped during the fourth quarter.

For the full year 2014, revenue was $956.3 million, an all-time record and compared with $927.5 million for 2013. Bookings were $1.018 billion, also a record, compared with $976.2 million for 2013. GAAP net income for 2014 was $105.1 million or $2.47 per diluted share, compared with $126.7 million or $3.01 per diluted share for 2013. Non-GAAP net income for 2014 was $126.5 million or $2.97 per diluted share, compared with $127.5 million or $3.03 per diluted share for 2013. GAAP results for 2014 include previously announced realignment and other pre-tax charges of $26.6 million, or $0.50 per share, net of taxes.

"Although 2014 was another year of record revenue and orders for FEI, we did not meet our expectations," commented Don Kania, president and CEO. "We delivered over $1.0 billion in bookings, but fell short of our growth and profit goals for the year due to a combination of internal and external factors.

"As we enter 2015, we see a strong demand environment across most of our end markets. Our cryo-EM workflows continue to gain traction in the broader structural biology community and are now widely accepted as a key method for new discovery. New products aimed at our materials science customers saw accelerated adoption in the second half of 2014. Our near-line solutions for the semiconductor industry uniquely position FEI to benefit from the growing complexity related to 3D structures and shrinking line widths.

"In 2014, we expanded our oil and gas capabilities with the acquisition of Lithicon; however, recent declines in oil prices will constrain our near term opportunity in this market."

Net cash provided by operating activities for 2014 was $142.9 million. During the full year, the company paid cash dividends of $31.1 million and spent $62.5 million to repurchase 795,000 shares of its common stock, $49.5 million on plant and equipment and $65.0 million on acquisitions. Total cash, investments and restricted cash at the end of the year was $502.1 million.

Outlook

For the first quarter of 2015, we expect year-over-year organic revenue growth of 1.0% to 7.0%. Based on current exchange rates, reported revenue is expected to be in the range of $215.0 million to $230.0 million. This range includes a negative impact related to the stronger U.S. dollar of approximately 5.0% on reported revenue growth as compared to the first quarter of 2014. GAAP earnings per share are expected to be in the range of $0.55 to $0.65. The effective tax rate is expected to be approximately 20%.

For full year 2015, organic revenue growth is expected to be in the range of 5.0% to 9.0% compared with 2014. Based on current exchange rates, the stronger U.S. dollar is expected to negatively impact full year 2015 reported revenue growth by approximately 4.0% as compared to the full year 2014. GAAP earnings per share for 2015 are expected to be in the range of $3.40 to $3.70. The effective tax rate for the full year is expected to be approximately 20%.

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 realignment efforts 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, February 4, 2015

Parties interested in listening to FEI's quarterly conference call may do so by dialing 1-888-437-9445 (U.S., toll-free) or +1-719-457-2628 (international and toll), with the conference title: FEI Fourth Quarter Earnings Conference Call, Conference ID 2591692. The call can also be accessed via the web by going to FEI's Investor Relations page at http://investor.fei.com/events.cfm, 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 first quarter of 2015 and full year 2015, the impact of certain items on our results for the quarter, statements about foreign currency exchange rates and the potential impact of a stronger U.S. dollar, assumptions about tax rates and our continued progress toward our mid-2015 gross margin and operating income targets. 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", "continue to see", "outlook" and other similar words and phrases. Factors that could affect these forward-looking statements include, but are not limited to: the global economic environment, particularly continued slower growth in China and emerging markets; lower than expected customer orders, including for recently-introduced products; potential weakness of the Science and Industry market segments, including continued weakness in the oil and gas sector of the Industry segment resulting from declining oil prices; fluctuations in foreign exchange rates, which, among other things, can affect revenues, margins, bookings, backlog and the competitive pricing of our products; cyclical and other changes and increased volatility in the semiconductor industry, which is a major component of Industry market segment revenue; changes in backlog and the timing of shipments from backlog, which may create forecasting challenges; potential delayed or reduced governmental spending to support expected orders; potential disruption in the company's operations due to organizational changes; the relative mix of higher-margin and lower-margin products; potential for increased volatility and challenges in forecasting resulting from larger sales transactions, cancellations and rescheduling of orders by customers; 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; 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; potential disruption in manufacturing or unexpected additional costs due to the transition from older to newer products; failure to achieve improved operational efficiency and other benefits from infrastructure investments and restructuring activities; potential additional restructurings, realignments and reorganizations; 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; and changes in tax rates and laws, accounting rules regarding taxes or agreements with tax authorities. 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)
December 31,
2014
September 28,
2014
December 31,
2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 300,507 $ 272,441 $ 384,170
Short-term investments in marketable securities 61,688 92,589 108,191
Short-term restricted cash 15,698 11,988 18,798
Receivables, net 227,354 219,203 194,418
Inventories, net 176,440 190,394 181,725
Deferred tax assets 8,225 9,890 15,114
Other current assets 35,503 42,648 28,324
Total current assets 825,415 839,153 930,740
Non-current investments in marketable securities 85,865 77,005 47,278
Long-term restricted cash 38,369 38,953 32,718
Non-current inventories 50,731 53,845 62,104
Property plant and equipment, net 163,794 166,520 157,829
Intangible assets, net 54,111 59,371 47,197
Goodwill 170,773 177,820 136,152
Deferred tax assets 6,605 9,156 1,751
Other assets, net 22,155 17,693 10,315
TOTAL $ 1,417,818 $ 1,439,516 $ 1,426,084
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 78,308 $ 79,584 $ 73,247
Accrued liabilities 51,604 48,970 57,851
Deferred revenue 96,924 92,386 91,563
Income taxes payable 5,299 12,435 4,579
Accrued restructuring, reorganization and relocation 9,161 6,462 50
Other current liabilities 56,146 55,907 46,324
Total current liabilities 297,442 295,744 273,614
Other liabilities 79,051 77,543 74,902
SHAREHOLDERS' EQUITY:
Preferred stock - 500 shares authorized; none issued and outstanding
Common stock - 70,000 shares authorized; 41,797, 41,844 and 42,136 shares issued and outstanding at December 31, 2014, September 28, 2014 and December 31, 2013 607,250 623,092 637,482
Retained earnings 461,586 438,564 392,958
Accumulated other comprehensive (loss) income (27,511) 4,573 47,128
Total shareholders' equity 1,041,325 1,066,229 1,077,568
TOTAL $ 1,417,818 $ 1,439,516 $ 1,426,084
FEI Company and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Fifty-Two Weeks Ended
December 31,
2014
September 28,
2014
December 31,
2013
December 31,
2014
December 31,
2013
NET SALES:
Products $ 205,207 $ 169,131 $ 207,154 $ 722,666 $ 709,438
Service 60,098 58,625 58,137 233,614 218,016
Total net sales 265,305 227,756 265,291 956,280 927,454
COST OF SALES:
Products 106,718 83,653 104,873 369,043 352,630
Service 35,188 35,522 35,826 139,082 136,039
Total cost of sales 141,906 119,175 140,699 508,125 488,669
Gross margin 123,399 108,581 124,592 448,155 438,785
OPERATING EXPENSES:
Research and development 25,434 25,312 26,328 102,613 101,947
Selling, general and administrative 49,170 49,463 48,051 197,682 179,560
Restructuring, reorganization and relocation 7,201 7,699 18,459 1,090
Total operating expenses 81,805 82,474 74,379 318,754 282,597
OPERATING INCOME 41,594 26,107 50,213 129,401 156,188
OTHER EXPENSE, NET (564) (831) (968) (2,471) (4,586)
INCOME BEFORE TAXES 41,030 25,276 49,245 126,930 151,602
INCOME TAX EXPENSE 7,639 3,629 7,972 21,866 24,929
NET INCOME $ 33,391 $ 21,647 $ 41,273 $ 105,064 $ 126,673
BASIC NET INCOME PER SHARE DATA $ 0.80 $ 0.52 $ 0.98 $ 2.50 $ 3.13
DILUTED NET INCOME PER SHARE DATA $ 0.79 $ 0.51 $ 0.97 $ 2.47 $ 3.01
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 41,726 41,891 41,963 41,969 40,446
Diluted 42,221 42,465 42,591 42,528 42,395
FEI Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Thirteen Weeks Ended (1) Fifty-Two Weeks Ended (1)
December 31,
2014
September 28,
2014
December 31,
2013
December 31,
2014
December 31,
2013
NET SALES:
Products 77.3% 74.3% 78.1% 75.6% 76.5%
Service 22.7 25.7 21.9 24.4 23.5
Total net sales 100.0% 100.0% 100.0% 100.0% 100.0%
COST OF SALES:
Products 40.2% 36.7% 39.5% 38.6% 38.0%
Service 13.3 15.6 13.5 14.5 14.7
Total cost of sales 53.5% 52.3% 53.0% 53.1% 52.7%
GROSS MARGIN:
Products 48.0% 50.5% 49.4% 48.9% 50.3%
Service 41.4 39.4 38.4 40.5 37.6
Gross margin 46.5 47.7 47.0 46.9 47.3
OPERATING EXPENSES:
Research and development 9.6% 11.1% 9.9% 10.7% 11.0%
Selling, general and administrative 18.5 21.7 18.1 20.7 19.4
Restructuring, reorganization and relocation 2.7 3.4 1.9 0.1
Total operating expenses 30.8% 36.2% 28.0% 33.3% 30.5%
OPERATING INCOME 15.7% 11.5% 18.9% 13.5% 16.8%
OTHER EXPENSE, NET (0.2)% (0.4)% (0.4)% (0.3)% (0.5)%
INCOME BEFORE TAXES 15.5% 11.1% 18.6% 13.3% 16.3%
INCOME TAX EXPENSE 2.9% 1.6% 3.0% 2.3% 2.7%
NET INCOME 12.6% 9.5% 15.6% 11.0% 13.7%
(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) Fifty-Two Weeks Ended (2)
December 31,
2014
September 28,
2014
December 31,
2013
December 31,
2014
December 31,
2013
GAAP Gross Margin $ 123,399 $ 108,581 $ 124,592 $ 448,155 $ 438,785
Adjustment for:
Inventory write-off 642 230 1,627
Non-GAAP Gross Margin $ 124,041 $ 108,811 $ 124,592 $ 449,782 $ 438,785
GAAP Operating Expenses $ 81,805 $ 82,474 $ 74,379 $ 318,754 $ 282,597
Adjustment for:
Acceleration of acquisition-related earn-out (2,500)
Impairment and other asset write-offs (1,676) (1,831) (3,973)
Restructuring activities (7,201) (7,699) (18,459) (1,090)
Non-GAAP Operating Expenses $ 72,928 $ 72,944 $ 74,379 $ 293,822 $ 281,507
GAAP Operating Income $ 41,594 $ 26,107 $ 50,213 $ 129,401 $ 156,188
Adjustment for:
Inventory write-off 642 230 1,627
Acceleration of acquisition-related earn-out 2,500
Impairment and other asset write-offs 1,676 1,831 3,973
Restructuring activities 7,201 7,699 18,459 1,090
Non-GAAP Operating Income $ 51,113 $ 35,867 $ 50,213 $ 155,960 $ 157,278
GAAP Net Income $ 33,391 $ 21,647 $ 41,273 $ 105,064 $ 126,673
Adjustment for:
Inventory write-off, net of tax 528 183 1,314
Acceleration of acquisition-related earn-out, net of tax 2,019
Impairment and other asset write-offs, net of tax 1,378 1,453 3,209
Restructuring activities, net of tax 5,922 6,110 14,908 870
Non-GAAP Net Income $ 41,219 $ 29,393 $ 41,273 $ 126,514 $ 127,543
GAAP Diluted Net Income Per Share $ 0.79 $ 0.51 $ 0.97 $ 2.47 $ 3.01
Adjustment for:
Inventory write-off 0.01 0.03
Acceleration of acquisition-related earn-out 0.05
Impairment and other asset write-offs 0.03 0.03 0.08
Restructuring activities 0.14 0.14 0.35 0.02
Non-GAAP Diluted Net Income Per Share $ 0.98 $ 0.69 $ 0.97 $ 2.97 $ 3.03
(2) Diluted net income per share amounts may not add due to rounding.

FEI Company and Subsidiaries
Consolidated Summary of Cash Flows
(In thousands)
(Unaudited)
Thirteen Weeks Ended Fifty-Two Weeks Ended
December 31,
2014
December 31,
2013
December 31,
2014
December 31,
2013
Net Income $ 33,391 $ 41,273 $ 105,064 $ 126,673
Depreciation 6,663 6,251 29,042 23,693
Amortization 3,812 2,700 14,290 10,568
Stock-based compensation 5,676 5,011 23,132 18,327
Other changes in working capital 20,765 42,471 (28,619) 58,687
Net cash provided by operating activities 70,307 97,706 142,909 237,948
Acquisition of property, plant and equipment (14,052) (15,262) (49,481) (62,414)
Payments for acquisitions, net of cash acquired (65,049) (2,694)
Other investing activities 15,681 (33,235) (2,285) (57,391)
Net cash used in investing activities 1,629 (48,497) (116,815) (122,499)
Dividends paid on common stock (10,443) (5,018) (31,062) (16,191)
Repurchases of common stock (22,208) (62,523)
Other financing activities (1,757) 3,601 9,183 12,824
Net cash used in financing activities (34,408) (1,417) (84,402) (3,367)
Effect of exchange rate changes (9,462) 876 (25,355) 5,786
(Decrease) increase in cash and cash equivalents $ 28,066 $ 48,668 $ (83,663) $ 117,868
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes, net $ 2,525 $ 3,412 $ 16,983 $ 10,917
Accrued purchases of plant and equipment 700 1,014 700 1,014
FEI Company and Subsidiaries
Supplemental Data Table
($ in millions, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Fifty-Two Weeks Ended
December 31,
2014
September 28,
2014
December 31,
2013
December 31,
2014
December 31,
2013
Income Statement Highlights
Consolidated sales $ 265.3 $ 227.8 $ 265.3 $ 956.3 $ 927.5
Gross margin 46.5% 47.7% 47.0% 46.9% 47.3%
Net income $ 33.4 $ 21.6 $ 41.3 $ 105.1 $ 126.7
Diluted net income per share $ 0.79 $ 0.51 $ 0.97 $ 2.47 $ 3.01
Sales and Bookings Highlights
Sales by Segment
Industry Group $ 109.5 $ 107.1 $ 121.3 $ 450.2 $ 427.7
Science Group 155.8 120.7 144.0 506.1 499.8
Sales by Geography
USA & Canada $ 75.9 $ 77.0 $ 65.5 $ 305.6 $ 260.6
Europe 80.6 56.6 71.6 267.8 270.7
Asia-Pacific and Rest of World 108.8 94.2 128.2 382.9 396.2
Gross Margin by Segment
Industry Group 49.9% 51.5% 51.2% 51.1% 52.1%
Science Group 44.1 44.3 43.4 43.1 43.2
Bookings and Backlog
Bookings - Total $ 261.9 $ 250.1 $ 256.8 $ 1,018.3 $ 976.2
Book-to-bill Ratio 0.99 1.10 0.97 1.06 1.05
Backlog - Total $ 535.6 $ 539.0 $ 473.5 $ 535.6 $ 473.5
Backlog - Service 170.8 160.5 124.2 170.8 124.2
Bookings by Segment
Industry Group $ 101.0 $ 154.2 $ 114.7 $ 488.3 $ 424.9
Science Group 160.9 95.9 142.1 530.0 551.3
Bookings by Geography
USA & Canada $ 69.0 $ 90.0 $ 78.5 $ 303.5 $ 276.7
Europe 79.0 53.4 76.8 298.3 280.7
Asia-Pacific and Rest of World 113.9 106.7 101.5 416.5 418.8
Balance Sheet and Other Highlights
Cash, equivalents, investments, restricted cash $ 502.1 $ 493.0 $ 591.2 $ 502.1 $ 591.2
Days sales outstanding (DSO) 78 88 67 78 67
Days in inventory 152 190 163 152 163
Days in payables (DPO) 50 61 48 50 48
Cash Cycle (DSO + Days in Inv - DPO) 180 217 182 180 182
Working capital $ 528.0 $ 543.4 $ 657.1 $ 528.0 $ 657.1
Headcount (permanent and temporary) 2,660 2,693 2,611 2,660 2,611
Euro average rate 1.25 1.33 1.36 1.33 1.33
Euro ending rate 1.21 1.27 1.38 1.21 1.38
Yen average rate 113.50 103.38 99.99 105.45 97.34
Yen ending rate 119.59 109.04 105.16 119.59 105.16

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

Source:FEI Company