FEI Company reported improved gross margins on modestly lower revenue for the first quarter of 2009, compared with both the fourth quarter of 2008 and the comparable quarter a year ago. Earnings per share of $0.17 were above last year’s first-quarter level and above the guidance provided in February. Revenue was near the high end of the guidance range, and bookings exceeded the company’s forecast.
For the quarter ended April 5, 2009, net sales of $141.8 million were down 7% compared to the fourth quarter of 2008 and down 6% compared to the first quarter of 2008. Gross bookings were $139.1 million before $8.5 million of currency revaluation of the backlog, resulting in net bookings of $130.6 million, compared with $153.8 million in the fourth quarter of 2008 and $150.5 million for the first quarter of 2008. The backlog at the end of the quarter was $319.3 million, approximately 90% of which is expected to ship in the next 12 months.
Gross margin in the latest quarter was 41.4%, the highest level in the last six quarters. Operating income was $8.1 million, compared with $11.2 million in the fourth quarter of 2008 and $8.8 million in last year’s first quarter. Restructuring expenses in the latest quarter reduced operating income by $1.0 million or $0.02 per diluted share. Net income for the first quarter of 2009 was $6.3 million, compared with $7.3 million in the fourth quarter of 2008 and $5.0 million in last year’s first quarter. Diluted earnings per share in the latest quarter were $0.17, compared with $0.20 in the fourth quarter of 2008 and $0.14 in the first quarter of 2008.
Results for the first quarter of 2008 have been restated for the effect of the required adoption of FSP No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Conversion).” The restatement reduced reported net income and diluted earnings per share for last year’s first quarter by $3.1 million and $0.06 per share. The restatement is related to the company’s zero percent convertible notes that were paid off in June 2008.
During the quarter the company substantially improved its balance sheet and liquidity. Total cash and investments increased by $53.6 million in the quarter to $372.9 million, and net cash decreased by $2.2 million. The company borrowed $70.8 million against its portfolio of auction rate securities and redeemed $15 million of its 2.875% convertible notes. Net cash provided by operating activities was positive $1.2 million for the quarter.
“We had a solid quarter in a difficult environment, with a good flow of orders and strong operational performance,” said Don Kania, president and CEO of FEI. “Gross margins improved significantly despite modestly lower revenues, driven by an improved product mix, a stronger dollar and our operating improvements. Operating expenses remained under tight control while we continued our investment in new products. Life Sciences, Electronics and Service bookings increased compared to the fourth quarter. Research & Industry bookings declined from the record levels of the fourth quarter, but they were up compared to the first quarter a year ago.
“For the second quarter, we are expecting similar overall levels of demand and operating results,” continued Kania. “In the second half, we see the potential for stronger Research and Life Sciences bookings, driven by economic stimulus programs around the world, in addition to continued penetration into the Life Sciences equipment market.”
Bookings and revenue comparisons for the company’s market segments and other data are included in the supplementary information attached to this release, along with detailed statements of operations and balance sheets. Additional supplementary information realigning the geographic breakdown of revenue for the previous eight quarters is also included.
Guidance for Q2 2009
Assuming a euro/dollar exchange rate of $1.35, FEI expects net sales in the second quarter of 2009 to be in the range of $136 million to $142 million. Bookings are expected to be at least $135 million. GAAP earnings per share are expected to be in the range of $0.10 to $0.14, including estimated restructuring charges of $800,000. In comparison to the first quarter results, second quarter earnings are expected to be affected by a higher tax rate and higher non-operating expense, due in part to lower interest income.
Investor Conference Call -- 2:00 p.m. PDT Tuesday, May 5, 2009
Parties interested in listening to FEI's quarterly conference call may do so by dialing 1-800-366-7640 (domestic, toll-free) or 1-303-262-2005 (international) and asking for the FEI First Quarter Earnings call. The call can also be accessed via the web by going to FEI's Investor Relations page at http://www.fei.com, where the webcast will also be archived. A telephone replay of the call will also be accessible for one month by dialing 1-800-405-2236 (US) or 1-303-590-3000 (international) and entering the access code 11130592#.
FEI (Nasdaq: FEIC) is the world leader in pioneering technologies and applications that deliver imaging solutions for 3D characterization, analysis and modification/prototyping, with resolutions down to the sub-Ångström level. With a 60-year history of technological innovation and leadership, FEI has set the performance standard across TEM, SEM and DualBeam categories with its Titan, Magellan and Helios product families. FEI’s customers, working in advanced research and manufacturing, are supported by field-experienced applications specialists. They have open access to FEI’s prestigious global user network so they can succeed in accelerating nanoscale discovery. FEI’s NanoPorts in North America, Europe and Asia provide centers of technical excellence where its world-class community of customers and specialists collaborate. FEI has sales and service operations in more than 50 countries around the world. More information can be found at: http://www.fei.com.