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8-K - FORM 8-K - FEI COq420128kpressrelease.htm


Exhibit 99.1
NEWS RELEASE
For more information contact:
FEI Company
Fletcher Chamberlin
Treasurer & Communications Director
(503) 726-7710
fletcher.chamberlin@fei.com
FEI Reports Record Bookings and Revenue for the Fourth Quarter and Full Year 2012
Q4 Revenue of $230.9 million; Q4 Bookings of $230.5 million
Full-year 2012 Revenue Up 8%; Full-year Bookings Up 13%
Q4 Diluted GAAP EPS of $0.72
HILLSBORO, Ore., February 6, 2013 - FEI Company (NASDAQ: FEIC) reported record bookings and revenue for 2012 and for the fourth quarter. Fourth quarter revenue of $230.9 million was up 8% compared to $213.0 million in the fourth quarter of 2011 and up 4% from $221.8 million in the third quarter of 2012.
The gross margin in the fourth quarter was 47.2%, compared with 44.4% in the fourth quarter of 2011 and 47.0% the third quarter of 2012.
The comparison between the fourth quarter of 2011 and 2012 of earnings per share computed on the basis of accounting principles generally accepted in the United States (“GAAP”) was affected by several items, as detailed below and in the attached table. Compared with the fourth quarter of 2011, GAAP earnings per share were unchanged, while non-GAAP earnings per share were up 22%.
GAAP net income for the fourth quarter was $29.8 million or $0.72 per diluted share, similar to the $29.1 million or $0.72 per diluted share in the fourth quarter of 2011 and $29.2 million or $0.71 per diluted share in the third quarter of 2012. Non-GAAP net income was $31.9 million or $0.77 per diluted share in the fourth quarter of 2012, compared with non-GAAP net income of $25.4 million or $0.63 per diluted share for the fourth quarter of 2011. Details of the items excluded for non-GAAP results and management's reasons for including this information are included below.
For the fourth quarter of 2012, net bookings were $230.5 million, an increase of 13% from net bookings of $203.6 million in the fourth quarter of 2011 and an increase of 3% from $223.3 million in the third quarter of 2012. The backlog at the end of the quarter was $424.8 million.
“A good fourth quarter completed another good year for FEI,” commented Don Kania, president and CEO. “2012 revenue grew by 8%. Gross margin increased another 210 basis points. We increased investment in R&D for growth, and cash flow from operating activities was again strong. We continued our evolution toward providing applications solutions to a range of markets and added key acquisitions that match our growth strategy. As we look to 2013, based on our view of the markets we serve, we forecast revenue growth to be in the 5% to 9% range compared with 2012.”
The fourth quarter of 2012 included restructuring charges of $2.9 million, as previously announced. The fourth quarter of 2011 included a net tax benefit of $7.8 million, which included a cumulative benefit of $12.4 million due to the Netherlands Tax Authority's approval of FEI's use of the “Innovation Box” for a portion of its Dutch taxable income. Also in the fourth quarter of 2011, the company incurred charges to operating expenses of $5.3 million related to certain patent litigation matters, a $2.1 million charge for early termination of a manufacturing contract, and $1.4 million for impairment of an intangible asset. After adjusting for 1) the restructuring charges in 2012, 2) the tax benefit in 2011 and 3) the previously mentioned operating expense charges in 2011, and applying an appropriate tax rate, the result is non-GAAP net income of $31.9 million or $0.77 per diluted share in the fourth quarter of 2012, compared with non-GAAP net income of $25.4 million and diluted earnings per share of $0.63 for the fourth quarter of 2011. 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 detailed GAAP statements of operations, balance sheets and additional supplementary information. Management's reasons for presenting non-GAAP information are outlined later in this release.





For the full year 2012, revenue was $891.7 million, an all-time record for the company and up 8% from $826.4 million in 2011. Bookings were $885.7 million, also a record, and were up 13% compared with 2011. Net income was $114.9 million or $2.80 per diluted share, compared with $103.6 million or $2.51 per diluted share for 2011. Gross margin for the year increased to 46.6% in 2012 from 44.5% in 2011.
Total cash, investments and restricted cash at the end of the quarter was $417.0 million, an increase of $57.2 million from the end of the third quarter. Total cash, investments and restricted cash decreased $39.1 million during the year, after investing $93.4 million for 3 acquisitions, payment of $15 million for a patent cross licensing agreement and initiating the company's first quarterly dividend in June 2012.
Guidance for Q1-2013
For the first quarter of 2013, revenue is expected to be in the range of $215 million to $225 million, and bookings are expected to be at least $225 million. GAAP earnings per share are expected to be in the range of $0.57 to $0.64, assuming an 18% effective tax rate. Included in the GAAP earnings per share guidance is $1.9 million, or $0.04 per share, in expected restructuring charges.
Non-GAAP Financial Measures
This press release provides financial measures for non-GAAP operating income, net income, diluted earnings per share and operating expenses that exclude certain costs related to restructuring charges, costs associated with settling certain patent litigation, costs related to early termination of a manufacturing contract, impairment of certain intangible assets and tax benefits associated with an agreement with Dutch tax authorities applicable to a portion of the company's income. Those financial measures are therefore not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”). Management believes that these non-GAAP financial measures provide meaningful supplemental information that enhances management's and investor's ability to evaluate FEI's operating results in comparison to prior periods that included some of those items.
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 measure 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.
Investor Conference Call -- 2:00 p.m. Pacific time, Wednesday, February 6, 2013
Parties interested in listening to FEI's quarterly conference call may do so by dialing 1-877-941-0844 (U.S., toll-free) or 1-480-629-9835 (international and toll), with the conference title: FEI Fourth Quarter Earnings Call, Conference ID 4589339. A telephone replay of the call will be available at 1-800-406-7325 (U.S., toll-free) or 1-303-590-3030 (international and toll) with the passcode: 4589339#. 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 statements regarding new product introductions, applications development and overall growth, as well as our guidance for revenue, earnings per share and bookings for the first quarter of 2013 and our revenue and general outlook for 2013. Forward-looking statements may also be identified by words and phrases that refer to future expectations, such as “guidance”, “guiding”, “toward”, “plan”, “expect”, “expects”, “are expected”, “will”, “projecting” 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 and potential weakness of the Materials Science, Electronics and Life Sciences market segments; potential reduced governmental spending due to budget constraints and uncertainty around global sovereign debt; potential disruption in the company's operations due to organization changes; limitations in our manufacturing capacity for certain products; problems in obtaining necessary product components in sufficient volumes on a timely basis from our supply chain; bankruptcy or insolvency of customers or suppliers; cyclical changes in the data storage and semiconductor industries, which are the major components of Electronics market revenue; fluctuations in foreign exchange, interest and tax rates; changes in tax rate and laws, accounting rules regarding taxes or agreements with tax authorities; the ongoing determination of the effectiveness of foreign exchange hedge transactions; reduced profitability due to failure to achieve or sustain margin improvement in service or product manufacturing; the relative mix of higher-margin and lower-margin products; risks associated with building and shipping a high percentage of the company's quarterly revenue in the last month of the quarter; customer requests to defer planned shipments; increased competition and new product offerings from competitors; lower average sales prices and reduced margins on some product sales due to increased competition; failure of the company's products and technology, including new products, to find acceptance with customers; inability to deploy products as expected or delays in shipping products due to technical problems or barriers; potential shipment or supply chain disruptions due to natural disasters or terrorist attacks; changes to or potential additional restructurings and reorganizations not presently anticipated; reduced sales due to geopolitical risks; changes in trade policies and tariff regulations; changes in the regulatory environment in the nations where we do business; additional selling, general and administrative or research and development expenses; additional costs related to future merger and acquisition activity; and failure of the company to achieve anticipated benefits of acquisitions and collaborations, including failure to achieve financial goals and integrate future acquisitions successfully. 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) is a leading supplier of scientific instruments for nanoscale applications and solutions in industry and science. With more than 60 years of technological innovation and leadership, FEI has set the performance standard in transmission electron microscopes (TEM), scanning electron microscopes (SEM) and DualBeams™, which combine a SEM with a focused ion beam (FIB). Headquartered in Hillsboro, Ore., USA, FEI has over 2,500 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,
2012
 
September 30,
2012
 
December 31,
2011
ASSETS
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
Cash and cash equivalents
$
266,302

 
$
261,892

 
$
320,361

Short-term investments in marketable securities
79,532

 
37,914

 
16,213

Short-term restricted cash
14,522

 
5,993

 
22,564

Receivables, net
211,160

 
221,814

 
185,955

Inventories, net
192,540

 
196,504

 
182,010

Deferred tax assets
12,245

 
16,696

 
18,899

Other current assets
29,332

 
34,593

 
27,964

Total current assets
805,633

 
775,406

 
773,966

Non-current investments in marketable securities
29,179

 
31,840

 
53,341

Long-term restricted cash
27,425

 
22,165

 
43,669

Non-current inventories
65,116

 
66,366

 
57,575

Property plant and equipment, net
109,872

 
99,774

 
85,082

Intangible assets, net
51,499

 
52,416

 
6,938

Goodwill
131,320

 
129,667

 
58,053

Deferred tax assets
5,092

 
4,573

 
934

Other assets, net
9,087

 
9,185

 
10,351

TOTAL
$
1,234,223

 
$
1,191,392

 
$
1,089,909

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
Accounts payable
$
54,847

 
$
57,945

 
$
52,470

Accrued liabilities
59,273

 
58,855

 
67,386

Deferred revenue
74,736

 
69,722

 
72,730

Income taxes payable
1,343

 
8,355

 
11,260

Accrued restructuring, reorganization and relocation
2,692

 

 
2,213

Convertible debt
89,010

 
89,010

 

Other current liabilities
36,902

 
53,402

 
48,623

Total current liabilities
318,803

 
337,289

 
254,682

Convertible debt

 

 
89,011

Other liabilities
75,517

 
58,713

 
49,402

SHAREHOLDERS’ EQUITY:
 
 
 
 
 
Preferred stock - 500 shares authorized; none issued and outstanding

 

 

Common stock - 70,000 shares authorized; 38,478, 38,107 and 37,866 shares issued and outstanding at December 31, 2012, September 30, 2012 and December 31, 2011
516,907

 
507,912

 
493,698

Retained earnings
284,440

 
257,684

 
178,661

Accumulated other comprehensive income
38,556

 
29,794

 
24,455

Total shareholders’ equity
839,903

 
795,390

 
696,814

TOTAL
$
1,234,223

 
$
1,191,392

 
$
1,089,909






FEI Company and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
 
Thirteen Weeks Ended
 
Year Ended
 
December 31,
2012
 
September 30,
2012
 
December 31,
2011
 
December 31,
2012
 
December 31,
2011
NET SALES:
 
 
 
 
 
 
 
 
 
Products
$
177,149

 
$
172,359

 
$
168,416

 
$
691,496

 
$
654,599

Service and components
53,797

 
49,426

 
44,574

 
200,242

 
171,827

Total net sales
230,946

 
221,785

 
212,990

 
891,738

 
826,426

COST OF SALES:
 
 
 
 
 
 
 
 
 
Products
87,560

 
86,333

 
89,496

 
347,224

 
344,575

Service and components
34,452

 
31,296

 
28,952

 
128,884

 
114,485

Total cost of sales
122,012

 
117,629

 
118,448

 
476,108

 
459,060

Gross margin
108,934

 
104,156

 
94,542

 
415,630

 
367,366

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
Research and development
25,029

 
23,908

 
21,547

 
94,965

 
78,318

Selling, general and administrative
44,420

 
41,931

 
47,175

 
169,719

 
158,782

Restructuring, reorganization and relocation
2,859

 

 
2,100

 
2,859

 
3,215

Total operating expenses
72,308

 
65,839

 
70,822

 
267,543

 
240,315

OPERATING INCOME
36,626

 
38,317

 
23,720

 
148,087

 
127,051

OTHER INCOME (EXPENSE), NET
(2,509
)
 
(1,712
)
 
(2,470
)
 
(7,539
)
 
(4,186
)
INCOME BEFORE TAXES
34,117

 
36,605

 
21,250

 
140,548

 
122,865

INCOME TAX EXPENSE (BENEFIT)
4,315

 
7,447

 
(7,838
)
 
25,628

 
19,228

NET INCOME
$
29,802

 
$
29,158

 
$
29,088

 
$
114,920

 
$
103,637

BASIC NET INCOME PER SHARE DATA
$
0.78

 
$
0.76

 
$
0.77

 
$
3.02

 
$
2.70

DILUTED NET INCOME PER SHARE DATA
0.72

 
0.71

 
0.72

 
2.80

 
2.51

WEIGHTED AVERAGE SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
 
Basic
38,295

 
38,082

 
37,727

 
38,065

 
38,384

Diluted
41,897

 
41,771

 
41,293

 
41,728

 
42,047






FEI Company and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
 
 
Thirteen Weeks Ended (1)
 
Year Ended (1)
 
December 31,
2012
 
September 30,
2012
 
December 31,
2011
 
December 31,
2012
 
December 31,
2011
NET SALES:
 
 
 
 
 
 
 
 
 
Products
76.7
 %
 
77.7
 %
 
79.1
 %
 
77.5
 %
 
79.2
 %
Service and components
23.3

 
22.3

 
20.9

 
22.5

 
20.8

Total net sales
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %
COST OF SALES:
 
 
 
 
 
 
 
 
 
Products
37.9
 %
 
38.9
 %
 
42.0
 %
 
38.9
 %
 
41.7
 %
Service and components
14.9

 
14.1

 
13.6

 
14.5

 
13.9

Total cost of sales
52.8
 %
 
53.0
 %
 
55.6
 %
 
53.4
 %
 
55.5
 %
GROSS MARGIN:
 
 
 
 
 
 
 
 
 
Products
50.6
 %
 
49.9
 %
 
46.9
 %
 
49.8
 %
 
47.4
 %
Service and components
36.0

 
36.7

 
35.0

 
35.6

 
33.4

Gross margin
47.2

 
47.0

 
44.4

 
46.6

 
44.5

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
Research and development
10.8
 %
 
10.8
 %
 
10.1
 %
 
10.6
 %
 
9.5
 %
Selling, general and administrative
19.2

 
18.9

 
22.1

 
19.0

 
19.2

Restructuring, reorganization and relocation
1.2

 

 
1.0

 
0.3

 
0.4

Total operating expenses
31.3
 %
 
29.7
 %
 
33.3
 %
 
30.0
 %
 
29.1
 %
OPERATING INCOME
15.9
 %
 
17.3
 %
 
11.1
 %
 
16.6
 %
 
15.4
 %
OTHER INCOME (EXPENSE), NET
(1.1
)%
 
(0.8
)%
 
(1.2
)%
 
(0.8
)%
 
(0.5
)%
INCOME BEFORE TAXES
14.8
 %
 
16.5
 %
 
10.0
 %
 
15.8
 %
 
14.9
 %
INCOME TAX EXPENSE (BENEFIT)
1.9
 %
 
3.4
 %
 
(3.7
)%
 
2.9
 %
 
2.3
 %
NET INCOME
12.9
 %
 
13.1
 %
 
13.7
 %
 
12.9
 %
 
12.5
 %
 
(1) 
Percentages may not add due to rounding.





FEI Company and Subsidiaries
Non-GAAP Income Statement
(In thousands, except per share amounts)
(Unaudited)

 
Thirteen Weeks Ended
 
Thirteen Weeks Ended
 
December 31, 2012
 
December 31, 2011
GAAP Operating Expenses
$
72,308

 
$
70,822

Adjustment for:
 
 
 
Restructuring and severance
(2,859
)
 

Estimate for patent litigation settlement

 
(5,300
)
Cost for early termination of a contract

 
(2,100
)
Impairment of intangible assets

 
(1,434
)
Non-GAAP Operating Expenses
$
69,449

 
$
61,988

 
 
 
 
GAAP Operating Income
$
36,626

 
$
23,720

Adjustment for:
 
 
 
Restructuring and severance
2,859

 

Estimate for patent litigation settlement

 
5,300

Cost for early termination of a contract

 
2,100

Impairment of intangible assets

 
1,434

Non-GAAP Operating Income
$
39,485

 
$
32,554

 
 
 
 
GAAP Net Income
$
29,802

 
$
29,088

Adjustment for:
 
 
 
Restructuring and severance, net of tax
2,144

 

Estimate for patent litigation settlement, net of tax

 
3,765

Cost for early termination of a contract, net of tax

 
1,492

Impairment of intangible assets, net of tax

 
1,019

Tax impact of "Dutch innovation box"  (1)

 
(9,955
)
Non-GAAP Net Income
$
31,946

 
$
25,409

 
41,897

 
41,293

GAAP Diluted Earnings Per Share
$
0.72

 
$
0.72

Adjustment for:
 
 
 
Restructuring and severance, net of tax
0.05

 

Estimate for patent litigation settlement, net of tax

 
0.09

Cost for early termination of a contract, net of tax

 
0.04

Impairment of intangible assets, net of tax

 
0.02

Tax impact of "Dutch innovation box"  (1)

 
(0.24
)
Non-GAAP Diluted Earnings Per Share
$
0.77

 
$
0.63


(1) Adjustment to taxes to reflect impact of "Dutch innovation box" on earnings for periods before Q4 2011.






FEI Company and Subsidiaries
Supplemental Data Table
(Dollars in millions, except per share amounts)
(Unaudited)
 
Q4 Ended December 31, 2012
Q3 Ended September 30, 2012
Q4 Ended December 31, 2011
 
Year Ended December 31, 2012
Year Ended December 31, 2011
Income Statement Highlights
 
 
 
 
 
 
 Consolidated sales
$
230.9

$
221.8

$
213.0

 
$
891.7

$
826.4

 Gross margin
47.2
%
47.0
%
44.4
%
 
46.6
%
44.5
%
 Stock compensation expense
$
4.1

$
3.4

$
3.3

 
$
14.2

$
11.1

 Net income
$
29.8

$
29.2

$
29.1

 
$
114.9

$
103.6

 Diluted net income per share
$
0.72

$
0.71

$
0.72

 
$
2.80

$
2.51

 Interest expense add back included in the calculation of diluted EPS
$
0.5

$
0.5

$
0.5

 
$
1.8

$
1.8

Sales Highlights
 
 
 
 
 
 
Sales by Market Segment
 
 
 
 
 
 
Electronics
$
56.8

$
76.9

$
54.8

 
$
293.1

$
259.7

Materials Science
101.5

72.3

91.8

 
315.5

292.1

Life Sciences
18.8

23.2

21.8

 
82.9

102.8

Service and Components
53.8

49.4

44.6

 
200.2

171.8

Sales by Geography
 
 
 
 
 
 
USA & Canada
$
71.7

$
75.6

$
59.0

 
$
291.7

$
257.2

Europe
70.3

64.4

69.5

 
244.7

261.3

Asia-Pacific and Rest of World
88.9

81.8

84.5

 
355.3

307.9

Gross Margin by Market Segment
 
 
 
 
 
 
Electronics
52.6
%
55.3
%
53.7
%
 
54.1
%
52.8
%
Materials Science
50.1

47.2

43.5

 
47.6

43.1

Life Sciences
47.1

40.4

44.0

 
42.9

45.8

Service and Components
36.0

36.7

35.0

 
35.6

33.4

Bookings and Backlog
 
 
 
 
 
 
 Bookings - Total
$
230.5

$
223.3

$
203.6

 
$
885.7

$
785.3

 Book-to-bill Ratio
1.00

1.01

0.96

 
0.99

0.95

 Backlog - Total
$
424.8

$
425.2

$
430.7

 
$
424.8

$
430.7

 Backlog - Service and Components
96.9

94.7

87.4

 
96.9

87.4

Bookings by Market Segment
 
 
 
 
 
 
Electronics
$
50.1

$
70.3

$
72.5

 
$
258.9

$
253.4

Materials Science
98.3

89.2

71.5

 
330.6

266.9

Life Sciences
26.1

15.5

19.5

 
86.6

87.0

Service and Components
56.0

48.3

40.1

 
209.6

178.0

Bookings by Geography
 
 
 
 
 
 
USA & Canada
$
78.4

$
63.1

$
48.6

 
$
281.2

$
216.8

Europe
83.7

82.1

51.6

 
268.8

239.6

Asia-Pacific and Rest of World
68.4

78.1

103.4

 
335.7

328.9

Balance Sheet Highlights
 
 
 
 
 
 
Cash, equivalents, investments, restricted cash
$
417.0

$
359.8

$
456.1

 
$
417.0

$
456.1

Operating cash generated (used)
$
59.6

$
16.2

$
49.9

 
$
85.0

$
102.7

Accounts receivable
$
211.2

$
221.8

$
186.0

 
$
211.2

$
186.0

Days sales outstanding (DSO)
83

91

80

 
83

80

Inventory turnover
1.9

1.8

2.0

 
1.9

2.0

Fixed asset investment
$
7.4

$
3.1

$
4.7

 
$
22.1

$
13.8

Depreciation expense
$
6.5

$
5.8

$
4.9

 
$
22.8

$
18.9

Working capital
$
486.8

$
438.1

$
519.3

 
$
486.8

$
519.3

Headcount (permanent and temporary)
2,518

2,399

2,074

 
2,518

2,074

Euro average rate
1.295

1.250

1.351

 
1.287

1.393

Euro ending rate
1.321

1.293

1.294

 
1.321

1.294