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FEI Reports Second Quarter 2015 Results

Revenue of $224 Million and Bookings of $252 Million

Gross Margin of 50.0% and EPS of $0.89

HILLSBORO, Ore., July 30, 2015 (GLOBE NEWSWIRE) -- FEI Company (NASDAQ:FEIC) reported results for the second quarter of 2015. Second quarter revenue of $224 million was down 5.4% compared to $237 million for second quarter of 2014. Movements in foreign exchange rates negatively impacted revenue for the second quarter of 2015 by $13 million, as compared with second quarter of 2014 rates. Excluding the impact of foreign exchange rate changes, second quarter organic revenue was flat compared with the second quarter of 2014.

Diluted earnings per share were $0.89 for the second quarter of 2015, compared with $0.59 for the second quarter of 2014. Net income for the second quarter of 2015 was $37 million, compared with $25 million for the second quarter of 2014.

Gross margin for the second quarter was 50.0%, compared with 46.4% for the second quarter of 2014. Operating margin was 20.5% for the second quarter of 2015, compared with 13.0% for the second quarter of 2014.

The company's backlog of orders at the end of the second quarter of 2015 was $541 million, compared with $517 million at the end of the second quarter of 2014 and $510 million at the end of the first quarter of 2015. Revaluation for changes in foreign exchange rates at the end of the quarter increased backlog by $4.1 million compared to the first quarter of 2015. Bookings for the second quarter of 2015 were $252 million, resulting in a book-to-bill of 1.12-to-1.

Net cash provided by operating activities for the second quarter of 2015 was $66 million, compared with $16 million in the second quarter of 2014. During the quarter, the company paid cash dividends of $10 million, spent $2.7 million on plant and equipment and repurchased 275,000 shares of its common stock at an average price of $77.97. Total cash, investments and restricted cash at the end of the quarter was $513 million.

"The FEI team executed on our 50% gross margin and 20% operating margin goals," commented Don Kania, president and CEO. "This enabled us to generate record second quarter EPS and $66 million of cash from operating activities.

"Our first half order activity from semiconductor and life sciences customers highlights our strong technology and competitive positioning in these key growth markets. As we look to the second half of 2015, our current backlog shows a high level of product deliveries in the fourth quarter, particularly to our Science customers."

Outlook

For the third quarter of 2015, the company currently expects reported revenue to be in the range of $215 million to $225 million. This range includes a negative impact related to the stronger U.S. dollar of approximately 5% as compared to the third quarter of 2014. Earnings per fully diluted share are expected to be in the range of $0.70 to $0.80. This range is based on an expected tax rate for the third quarter of approximately 20%.

For full year 2015, the company continues to expect organic revenue growth to be in the range of 4% to 7% compared with 2014 and earnings per fully diluted share in the range of $3.40 to $3.70. This EPS range is based on an expected tax rate for the full year of approximately 20%. Based on current exchange rates, the stronger U.S. dollar is expected to negatively impact full year 2015 reported revenue growth by approximately 5% as compared to the full year 2014.

Investor Conference Call - 2:00 p.m. Pacific Time, Thursday, July 30, 2015

Parties interested in listening to FEI's quarterly conference call may do so by dialing 1-877-407-8293 (U.S., toll-free) or +1-201-689-8349 (international and toll), with the conference title: FEI Second Quarter Earnings Conference Call. 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 third 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 statements about potential healthy revenue growth and the timing product of deliveries in certain markets. 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 2,800 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 28, December 31,
2015 2014
Assets
Current Assets:
Cash and cash equivalents $ 333,194 $ 300,507
Short-term investments in marketable securities 42,476 61,688
Short-term restricted cash 15,514 15,698
Receivables, net 211,745 227,354
Inventories, net 181,659 176,440
Deferred tax assets 9,587 8,225
Other current assets 32,486 35,503
Total current assets 826,661 825,415
Long-term investments in marketable securities 91,139 85,865
Long-term restricted cash 30,344 38,369
Property plant and equipment, net 156,203 163,794
Intangible assets, net 49,834 54,111
Goodwill 167,936 170,773
Deferred tax assets 8,927 6,605
Long-term inventories 48,703 50,731
Other assets, net 20,656 22,155
Total Assets $ 1,400,403 $ 1,417,818
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 74,406 $ 78,308
Accrued payroll liabilities 37,464 38,599
Accrued warranty reserves 13,311 13,005
Short-term deferred revenue 95,669 96,924
Income taxes payable 12,574 5,299
Accrued restructuring, reorganization, relocation and severance 1,692 9,161
Other current liabilities 53,894 56,146
Total current liabilities 289,010 297,442
Long-term deferred revenue 37,071 34,021
Deferred tax liabilities 7,666 9,576
Other liabilities 35,687 35,454
Shareholders' Equity:
Preferred stock - 500 shares authorized; none issued and outstanding
Common stock - 70,000 shares authorized; 41,589 and 41,797 shares issued and outstanding at June 28, 2015 and December 31, 2014 592,665 607,250
Retained earnings 503,961 461,586
Accumulated other comprehensive loss (65,657) (27,511)
Total shareholders' equity 1,030,969 1,041,325
Total Liabilities and Shareholders' Equity $ 1,400,403 $ 1,417,818
FEI Company and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 28, June 29, June 28, June 29,
2015 2014 2015 2014
Net Sales:
Products $ 163,585 $ 179,030 $ 327,644 $ 348,328
Service 60,604 57,925 117,361 114,892
Total net sales 224,189 236,955 445,005 463,220
Cost of Sales:
Products 78,825 92,077 160,326 178,673
Service 33,259 35,027 67,303 68,371
Total cost of sales 112,084 127,104 227,629 247,044
Gross profit 112,105 109,851 217,376 216,176
Operating Expenses:
Research and development 23,128 26,221 46,450 51,866
Selling, general and administrative 43,093 50,587 88,915 99,050
Restructuring, reorganization, relocation and severance (21) 2,228 (142) 3,559
Total operating expenses 66,200 79,036 135,223 154,475
Operating Income 45,905 30,815 82,153 61,701
Other Expense, Net (590) (806) (1,557) (1,076)
Income Before Income Taxes 45,315 30,009 80,596 60,625
Income Tax Expense 7,983 5,061 15,252 10,599
Net Income $ 37,332 $ 24,948 $ 65,344 $ 50,026
Basic Net Income Per Share $ 0.90 $ 0.59 $ 1.57 $ 1.19
Diluted Net Income Per Share $ 0.89 $ 0.59 $ 1.55 $ 1.17
Weighted Average Shares Outstanding:
Basic 41,629 42,080 41,711 42,135
Diluted 42,044 42,627 42,142 42,701
FEI Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Thirteen Weeks Ended (1) Twenty-Six Weeks Ended (1)
June 28, June 29, June 28, June 29,
2015 2014 2015 2014
Net Sales:
Products 73.0% 75.6% 73.6% 75.2%
Service 27.0 24.4 26.4 24.8
Total net sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales:
Products 35.2% 38.9% 36.0% 38.6%
Service 14.8 14.8 15.1 14.8
Total cost of sales 50.0% 53.6% 51.2% 53.3%
Gross Margin:
Products 51.8% 48.6% 51.1% 48.7%
Service 45.1 39.5 42.7 40.5
Gross margin 50.0 46.4 48.8 46.7
Operating Expenses:
Research and development 10.3% 11.1% 10.4% 11.2%
Selling, general and administrative 19.2 21.3 20.0 21.4
Restructuring, reorganization, relocation and severance 0.9 0.8
Total operating expenses 29.5% 33.4% 30.4% 33.3%
Operating Income 20.5% 13.0% 18.5% 13.3%
Other Expense, Net (0.3)% (0.3)% (0.3)% (0.2)%
Income Before Income Taxes 20.2% 12.7% 18.1% 13.1%
Income Tax Expense 3.6% 2.1% 3.4% 2.3%
Net Income 16.7% 10.5% 14.7% 10.8%
(1) Percentages may not add due to rounding.
FEI Company and Subsidiaries
Consolidated Summary of Cash Flows
(In thousands)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 28, June 29, June 28, June 29,
2015 2014 2015 2014
Net Income $ 37,332 $ 24,948 $ 65,344 $ 50,026
Depreciation 6,082 7,574 12,063 14,640
Amortization 2,825 3,667 5,715 6,864
Stock-based compensation 4,545 5,823 10,494 10,961
Other changes in working capital 15,076 (26,036) (4,632) (38,067)
Net cash provided by operating activities 65,860 15,976 88,984 44,424
Acquisition of property, plant and equipment (2,677) (18,986) (7,869) (23,322)
Payments for acquisitions, net of cash acquired (434) (5,377) (65,049)
Other investing activities 22,376 (7,512) 17,059 (31,599)
Net cash provided by (used in) investing activities 19,699 (26,932) 3,813 (119,970)
Dividends paid on common stock (10,427) (5,071) (20,877) (10,129)
Repurchases of common stock (21,928) (30,479) (30,224) (30,479)
Other financing activities 3,303 2,145 6,325 8,560
Net cash used in financing activities (29,052) (33,405) (44,776) (32,048)
Effect of exchange rate changes 8,431 (933) (15,334) (4,204)
Decrease in cash and cash equivalents $ 64,938 $ (45,294) $ 32,687 $ (111,798)
Cash and Cash Equivalents:
Beginning of period 268,256 317,666 300,507 384,170
End of period $ 333,194 $ 272,372 $ 333,194 $ 272,372
Supplemental Cash Flow Information:
Cash paid for income taxes, net $ 4,655 $ 6,172 $ 10,597 $ 9,883
Accrued purchases of plant and equipment 443 4,619 443 4,619
Dividends declared but not paid 12,479 10,564 12,479 10,564
Accrued repurchases of common stock 1,271 1,271
FEI Company and Subsidiaries
Supplemental Data Table
($ in millions, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014
Income Statement Highlights:
Consolidated sales $ 224.2 $ 237.0 $ 445.0 $ 463.2
Gross margin 50.0% 46.4% 48.8% 46.7%
Net income $ 37.3 $ 24.9 $ 65.3 $ 50.0
Diluted net income per share $ 0.89 $ 0.59 $ 1.55 $ 1.17
Sales and Bookings Highlights:
Sales by Segment
Industry Group $ 119.6 $ 127.2 $ 231.5 $ 233.7
Science Group 104.6 109.8 213.5 229.5
Sales by Geography
USA & Canada $ 76.4 $ 80.5 $ 141.4 $ 152.7
Europe 56.8 63.6 111.3 130.6
Asia-Pacific and Rest of World 91.0 92.9 192.3 179.9
Gross Margin by Segment
Industry Group 54.1% 50.4% 52.4% 51.5%
Science Group 45.3 41.7 45.0 41.8
Bookings and Backlog
Bookings - Total $ 251.6 $ 260.5 $ 467.5 $ 508.0
Book-to-bill Ratio 1.12 1.10 1.05 1.10
Backlog - Total $ 541.2 $ 516.7 $ 541.2 $ 516.7
Backlog - Service 165.0 143.5 165.0 143.5
Bookings by Segment
Industry Group $ 112.7 $ 110.2 $ 249.8 $ 233.3
Science Group 138.9 150.3 217.7 274.7
Bookings by Geography
USA & Canada $ 91.3 $ 86.4 $ 143.7 $ 144.5
Europe 73.0 74.5 111.3 167.7
Asia-Pacific and Rest of World 87.3 99.6 212.5 195.8
Balance Sheet and Other Highlights:
Cash, equivalents, investments, restricted cash $ 512.7 $ 510.2 $ 512.7 $ 510.2
Days sales outstanding (DSO) 86 87 86 87
Days in inventory 180 181 180 181
Days in payables (DPO) 61 63 61 63
Cash Cycle (DSO + Days in Inventory - DPO) 205 205 205 205
Working capital $ 537.7 $ 589.8 $ 537.7 $ 589.8
Headcount (permanent and temporary) 2,826 2,689 2,826 2,689
Euro average rate 1.10 1.37 1.12 1.37
Euro ending rate 1.12 1.36 1.12 1.36
Yen average rate 121.01 102.18 119.97 102.46
Yen ending rate 123.71 101.37 123.71 101.37

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

Source:FEI Company