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 securities 36,015     61,688  
Short-term restricted cash 23,444     15,698  
Receivables, net 208,909     227,354  
Inventories, net 191,648     176,440  
Deferred tax assets 8,652     8,225  
Other current assets 31,050     35,503  
Total current assets 881,576     825,415  
Long-term investments in marketable securities 34,016     85,865  
Long-term restricted cash 24,758     38,369  
Property plant and equipment, net 152,919     163,794  
Intangible assets, net 37,815     54,111  
Goodwill 145,639     170,773  
Deferred tax assets 8,129     6,605  
Long-term inventories 47,401     50,731  
Other assets, net 19,001     22,155  
Total Assets $ 1,351,254     $ 1,417,818  
Liabilities and Shareholders’ Equity      
Current Liabilities:      
Accounts payable $ 67,788     $ 78,308  
Accrued payroll liabilities 37,304     38,599  
Accrued warranty reserves 13,159     13,005  
Short-term deferred revenue 107,485     96,924  
Income taxes payable 4,896     5,299  
Accrued restructuring, reorganization, relocation and severance 858     9,161  
Other current liabilities 58,289     56,146  
Total current liabilities 289,779     297,442  
Long-term deferred revenue 39,765     34,021  
Deferred tax liabilities 4,694     9,576  
Other liabilities 31,752     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, 2014 556,452     607,250  
Retained earnings 501,944     461,586  
Accumulated other comprehensive loss (73,132 )   (27,511 )
Total shareholders’ equity 985,264     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  
Service 60,718     58,625     178,079     173,517  
Total net sales 212,561     227,756     657,566     690,976  
Cost of Sales:              
Products 74,639     83,653     234,965     262,327  
Service 33,645     35,522     100,948     103,893  
Total cost of sales 108,284     119,175     335,913     366,220  
Gross profit 104,277     108,581     321,653     324,756  
Operating Expenses:              
Research and development 23,825     25,312     70,275     77,178  
Selling, general and administrative 43,467     49,463     132,382     148,513  
Impairment of goodwill and long-lived assets 26,596         26,596      
Restructuring, reorganization, relocation and severance (423 )   7,699     (565 )   11,259  
Total operating expenses 93,465     82,474     228,688     236,950  
Operating Income 10,812     26,107     92,965     87,806  
Other Expense, Net (1,372 )   (831 )   (2,929 )   (1,907 )
Income Before Income Taxes 9,440     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:              
Basic 41,404     41,891     41,624     42,053  
Diluted 41,820     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:              
Products 71.4   %   74.3   %   72.9   %   74.9   %
Service 28.6       25.7       27.1       25.1    
Total net sales 100.0   %   100.0   %   100.0   %   100.0   %
Cost of Sales:              
Products 35.1   %   36.7   %   35.7   %   38.0   %
Service 15.8       15.6       15.4       15.0    
Total cost of sales 50.9   %   52.3   %   51.1   %   53.0   %
Gross Margin:              
Products 50.8   %   50.5   %   51.0   %   49.3   %
Service 44.6       39.4       43.3       40.1    
Gross margin 49.1       47.7       48.9       47.0    
Operating Expenses:              
Research and development 11.2   %   11.1   %   10.7   %   11.2   %
Selling, general and administrative 20.4       21.7       20.1       21.5    
Impairment of goodwill and long-lived assets 12.5             4.0          
Restructuring, reorganization, relocation and severance (0.2 )     3.4       (0.1 )     1.6    
Total operating expenses 44.0   %   36.2   %   34.8   %   34.3   %
Operating Income 5.1   %   11.5   %   14.1   %   12.7   %
Other Expense, Net (0.6 ) %   (0.4 ) %   (0.4 ) %   (0.3 ) %
Income Before Income Taxes 4.4   %   11.1   %   13.7   %   12.4   %
Income Tax (Benefit) Expense (0.5 ) %   1.6   %   2.2   %   2.1   %
Net Income 4.9   %   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  
Depreciation 6,301     7,740     18,364     22,379  
Amortization 2,765     3,614     8,480     10,478  
Stock-based compensation 6,121     6,494     16,615     17,456  
Impairment of goodwill and long-lived assets 26,596     40     26,596     322  
Other changes in working capital (6,452 )   (11,360 )   (11,084 )   (49,708 )
Net cash provided by operating activities 45,749     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 activities 59,783     13,631     76,842     (17,967 )
Net cash provided by (used in) investing activities 57,543     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 activities 2,349     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 equivalents 48,664     69     $ 81,351     $ (111,729 )
Cash and Cash Equivalents:              
Beginning of period 333,194     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 equipment 1,675     986     1,675     986  
Dividends declared but not paid 12,453     10,461     12,453     10,461  
Accrued repurchases of common stock 1,095         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 margin 49.1 %   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 Group 107.3     120.7     320.8     350.3  
Sales by Geography              
USA & Canada $ 76.3     $ 77.0     $ 217.7     $ 229.7  
Europe 48.6     56.6     159.9     187.2  
Asia-Pacific and Rest of World 87.7     94.2     280.0     274.1  
Gross Margin by Segment              
Industry Group 52.4 %   51.5 %   52.4 %   51.5 %
Science Group 45.8     44.3     45.2     42.7  
Bookings and Backlog              
Bookings – Total $ 233.7     $ 265.1     $ 701.2     $ 773.1  
Book-to-bill Ratio 1.10     1.16     1.07     1.12  
Backlog – Total $ 562.2     $ 539.0     $ 562.2     $ 539.0  
Backlog – Service 165.7     160.5     165.7     160.5  
Bookings by Segment              
Industry Group $ 114.6     $ 157.8     $ 364.4     $ 391.1  
Science Group 119.1     107.3     336.8     382.0  
Bookings by Geography              
USA & Canada $ 99.8     $ 90.0     $ 243.5     $ 234.5  
Europe 54.8     65.7     166.1     233.4  
Asia-Pacific and Rest of World 79.1     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 inventory 198     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 rate 1.11     1.33     1.12     1.36  
Euro ending rate 1.12     1.27     1.12     1.27  
Yen average rate 122.72     103.38     120.88     102.76  
Yen ending rate 120.99     109.04     120.99     109.04  

 

CONTACT: For more information contact:

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

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