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FEI Reports Third Quarter 2015 Results

HILLSBORO, Ore., Oct. 27, 2015 (GLOBE NEWSWIRE) -- FEI Company (NASDAQ:FEIC) today reported results for the third quarter of 2015. Third quarter revenue of $213 million was down 6.7% compared to $228 million for third quarter of 2014. Movements in foreign exchange rates negatively impacted revenue for the third quarter of 2015 by approximately $10 million, as compared with third quarter of 2014 rates. Excluding the impact of foreign exchange movements, third quarter organic revenue was down 2.4% compared with the third quarter of 2014.

Diluted earnings per share were $0.25, compared with $0.51 in the third quarter of 2014. Net income for the quarter was $10 million compared with $22 million in the third quarter of 2014. Included in third quarter 2015 results are tax benefits in the amount of $6.1 million, or $0.15 per share, and a non-cash impairment of goodwill and long-lived assets of $24 million, or $0.58 per share, net of taxes. The impairment is related to assets supporting the company’s oil and gas business.

The company’s backlog of orders at the end of the third quarter of 2015 was $562 million, compared with $539 million at the end of the third quarter of 2014 and $541 million at the end of the second quarter of 2015. Bookings for the third quarter of 2015 were $234 million, resulting in a book-to-bill of 1.10-to-1.

“While Science met our expectations, activity at our large semiconductor customers fell short of our forecast in the third quarter,” commented Don Kania, president and CEO. “Near term spending at our semiconductor customers is being impacted as the industry transitions to 10nm devices.

“We saw increased activity in our Science business during the third quarter and expect a strong finish to the year from this group. We remain focused on investing to drive our technology leadership and ensuring we are well positioned for the significant long term growth opportunities we see in our Science and Industrial markets.”

Net cash provided by operating activities for the third quarter of 2015 was $46 million, compared with $28 million in the third quarter of 2014. During the quarter, the company paid cash dividends of $12 million, invested $2.2 million on plant and equipment and repurchased 545,000 shares of its common stock at an average price of $77.41. Total cash, investments and restricted cash at the end of the quarter was $500 million.

Outlook

For the fourth quarter of 2015, the company currently expects reported revenue to be in the range of $260 million to $275 million. This range reflects the expected negative impact of a stronger U.S. dollar of approximately 4.0% as compared to the fourth quarter of 2014. Earnings per fully diluted share are expected to be in the range of $1.05 to $1.20. This range is based on an expected tax rate for the fourth quarter of approximately 20%.

For full year 2015, the company expects organic revenue growth to be in the range of 1.0% to 2.5%, compared with 2014, and earnings per fully diluted share in the range of $2.85 to $3.00. This range includes the impairment expense and tax benefits the company recorded in the third quarter of 2015. 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, Tuesday, October 27, 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 Third 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/event, 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 fourth quarter of 2015 and full year 2015, the impact of certain items on our results for these periods, statements regarding our sources of revenue, our investments and expenditures, foreign currency exchange rates, assumptions about tax rates, the location of our cash, the allocation of our resources and expenditures and developments, trends, and opportunities 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", "are expected", "is expected", "believe", "anticipate", "will", "projecting", "look 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 lower 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 book and ship 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; the ongoing determination of the effectiveness of foreign exchange hedge transactions; the relative mix of U.S. and non-U.S. sales; 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; bankruptcy or insolvency of customers or suppliers; and changes in U.S. and foreign 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)
September 27,
2015
December 31,
2014
Assets
Current Assets:
Cash and cash equivalents$381,858 $300,507
Short-term investments in marketable securities36,015 61,688
Short-term restricted cash23,444 15,698
Receivables, net208,909 227,354
Inventories, net191,648 176,440
Deferred tax assets8,652 8,225
Other current assets31,050 35,503
Total current assets881,576 825,415
Long-term investments in marketable securities34,016 85,865
Long-term restricted cash24,758 38,369
Property plant and equipment, net152,919 163,794
Intangible assets, net37,815 54,111
Goodwill145,639 170,773
Deferred tax assets8,129 6,605
Long-term inventories47,401 50,731
Other assets, net19,001 22,155
Total Assets$1,351,254 $1,417,818
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable$67,788 $78,308
Accrued payroll liabilities37,304 38,599
Accrued warranty reserves13,159 13,005
Short-term deferred revenue107,485 96,924
Income taxes payable4,896 5,299
Accrued restructuring, reorganization, relocation and severance858 9,161
Other current liabilities58,289 56,146
Total current liabilities289,779 297,442
Long-term deferred revenue39,765 34,021
Deferred tax liabilities4,694 9,576
Other liabilities31,752 35,454
Shareholders' Equity:
Preferred stock - 500 shares authorized; none issued and outstanding
Common stock - 70,000 shares authorized; 41,065 and 41,797 shares issued and outstanding at September 27, 2015 and December 31, 2014556,452 607,250
Retained earnings501,944 461,586
Accumulated other comprehensive loss(73,132) (27,511)
Total shareholders’ equity985,264 1,041,325
Total Liabilities and Shareholders' Equity$1,351,254 $1,417,818


FEI Company and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 27,
2015
September 28,
2014
September 27,
2015
September 28,
2014
Net Sales:
Products$151,843 $169,131 $479,487 $517,459
Service60,718 58,625 178,079 173,517
Total net sales212,561 227,756 657,566 690,976
Cost of Sales:
Products74,639 83,653 234,965 262,327
Service33,645 35,522 100,948 103,893
Total cost of sales108,284 119,175 335,913 366,220
Gross profit104,277 108,581 321,653 324,756
Operating Expenses:
Research and development23,825 25,312 70,275 77,178
Selling, general and administrative43,467 49,463 132,382 148,513
Impairment of goodwill and long-lived assets26,596 26,596
Restructuring, reorganization, relocation and severance(423) 7,699 (565) 11,259
Total operating expenses93,465 82,474 228,688 236,950
Operating Income10,812 26,107 92,965 87,806
Other Expense, Net(1,372) (831) (2,929) (1,907)
Income Before Income Taxes9,440 25,276 90,036 85,899
Income Tax (Benefit) Expense(978) 3,629 14,274 14,228
Net Income$10,418 $21,647 $75,762 $71,671
Basic Net Income Per Share$0.25 $0.52 $1.82 $1.70
Diluted Net Income Per Share$0.25 $0.51 $1.80 $1.68
Weighted Average Shares Outstanding:
Basic41,404 41,891 41,624 42,053
Diluted41,820 42,465 42,050 42,624


FEI Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Thirteen Weeks Ended (1) Thirty-Nine Weeks Ended (1)
September 27,
2015
September 28,
2014
September 27,
2015
September 28,
2014
Net Sales:
Products71.4 % 74.3 % 72.9 % 74.9 %
Service28.6 25.7 27.1 25.1
Total net sales100.0 % 100.0 % 100.0 % 100.0 %
Cost of Sales:
Products35.1 % 36.7 % 35.7 % 38.0 %
Service15.8 15.6 15.4 15.0
Total cost of sales50.9 % 52.3 % 51.1 % 53.0 %
Gross Margin:
Products50.8 % 50.5 % 51.0 % 49.3 %
Service44.6 39.4 43.3 40.1
Gross margin49.1 47.7 48.9 47.0
Operating Expenses:
Research and development11.2 % 11.1 % 10.7 % 11.2 %
Selling, general and administrative20.4 21.7 20.1 21.5
Impairment of goodwill and long-lived assets12.5 4.0
Restructuring, reorganization, relocation and severance(0.2) 3.4 (0.1) 1.6
Total operating expenses44.0 % 36.2 % 34.8 % 34.3 %
Operating Income5.1 % 11.5 % 14.1 % 12.7 %
Other Expense, Net(0.6)% (0.4)% (0.4)% (0.3)%
Income Before Income Taxes4.4 % 11.1 % 13.7 % 12.4 %
Income Tax (Benefit) Expense(0.5)% 1.6 % 2.2 % 2.1 %
Net Income4.9 % 9.5 % 11.5 % 10.4 %
(1) Percentages may not add due to rounding.


FEI Company and Subsidiaries
Consolidated Summary of Cash Flows
(In thousands)
(Unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 27,
2015
September 28,
2014
September 27,
2015
September 28,
2014
Net Income$10,418 $21,647 $75,762 $71,671
Depreciation6,301 7,740 18,364 22,379
Amortization2,765 3,614 8,480 10,478
Stock-based compensation6,121 6,494 16,615 17,456
Impairment of goodwill and long-lived assets26,596 40 26,596 322
Other changes in working capital(6,452) (11,360) (11,084) (49,708)
Net cash provided by operating activities45,749 28,175 134,733 72,598
Acquisition of property, plant and equipment(2,240) (12,107) (10,109) (35,429)
Payments for acquisitions, net of cash acquired (5,377) (65,049)
Other investing activities59,783 13,631 76,842 (17,967)
Net cash provided by (used in) investing activities57,543 1,524 61,356 (118,445)
Dividends paid on common stock(12,462) (10,490) (33,340) (20,619)
Repurchases of common stock(42,350) (9,836) (72,575) (40,315)
Other financing activities2,349 2,379 8,675 10,940
Net cash used in financing activities(52,463) (17,947) (97,240) (49,994)
Effect of exchange rate changes(2,165) (11,683) (17,498) (15,888)
Decrease in cash and cash equivalents48,664 69 $81,351 $(111,729)
Cash and Cash Equivalents:
Beginning of period333,194 272,372 300,507 384,170
End of period$381,858 $272,441 $381,858 $272,441
Supplemental Cash Flow Information:
Cash paid for income taxes, net$11,825 $4,575 $22,422 $14,458
Accrued purchases of plant and equipment1,675 986 1,675 986
Dividends declared but not paid12,453 10,461 12,453 10,461
Accrued repurchases of common stock1,095 1,095


FEI Company and Subsidiaries
Supplemental Data Table
($ in millions, except per share amounts)
(Unaudited)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 27, 2015 September 28, 2014 September 27, 2015 September 28, 2014
Income Statement Highlights:
Consolidated sales$212.6 $227.8 $657.6 $691.0
Gross margin49.1% 47.7% 48.9% 47.0%
Net income$10.4 $21.6 $75.8 $71.7
Diluted net income per share$0.25 $0.51 $1.80 $1.68
Sales and Bookings Highlights:
Sales by Segment
Industry Group$105.3 $107.1 $336.8 $340.7
Science Group107.3 120.7 320.8 350.3
Sales by Geography
USA & Canada$76.3 $77.0 $217.7 $229.7
Europe48.6 56.6 159.9 187.2
Asia-Pacific and Rest of World87.7 94.2 280.0 274.1
Gross Margin by Segment
Industry Group52.4% 51.5% 52.4% 51.5%
Science Group45.8 44.3 45.2 42.7
Bookings and Backlog
Bookings - Total$233.7 $265.1 $701.2 $773.1
Book-to-bill Ratio1.10 1.16 1.07 1.12
Backlog - Total$562.2 $539.0 $562.2 $539.0
Backlog - Service165.7 160.5 165.7 160.5
Bookings by Segment
Industry Group$114.6 $157.8 $364.4 $391.1
Science Group119.1 107.3 336.8 382.0
Bookings by Geography
USA & Canada$99.8 $90.0 $243.5 $234.5
Europe54.8 65.7 166.1 233.4
Asia-Pacific and Rest of World79.1 109.4 291.6 305.2
Balance Sheet and Other Highlights:
Cash, equivalents, investments, restricted cash$500.1 $493.0 $500.1 $493.0
Days sales outstanding (DSO)90 88 90 88
Days in inventory198 190 198 190
Days in payables (DPO)57 61 57 61
Cash Cycle (DSO + Days in Inventory - DPO)231 217 231 217
Working capital$591.8 $543.4 $591.8 $543.4
Headcount (permanent and temporary)2,855 2,693 2,855 2,693
Euro average rate1.11 1.33 1.12 1.36
Euro ending rate1.12 1.27 1.12 1.27
Yen average rate122.72 103.38 120.88 102.76
Yen ending rate120.99 109.04 120.99 109.04


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

Source:FEI Company