FEIC

FEI Company (FEIC)

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FEI Company (FEIC)

Q2 2009 Earnings Call Transcript

August 5, 2009 5:00 pm ET

Executives

Fletcher Chamberlin – Treasurer and IR Director

Ray Link – EVP and CFO

Don Kania – President and CEO

Analysts

Vis Vellore – Credit Suisse

Bill Ong – Merriman Curhan Ford & Co.

JoAnne Feeney – FTN Equity Capital

Steve O'Rourke – Deutsche Bank

Peter Wright – GC Research

Matt Petkun – D.A. Davidson & Co.

Patrick Ho – Stifel Nicolaus

Bill Dezellem – Tieton Capital Management

John Roy – Janney Montgomery Scott

Presentation

Operator

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the FEI second quarter earnings conference call. Here in today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator instructions) This conference is being recorded today, Wednesday, August 5th, 2009.

I would now like to turn the conference over to our host, Mr. Fletcher Chamberlin. Please go ahead, sir.

Fletcher Chamberlin

Thank you, operator. Good afternoon, ladies and gentlemen. As the operator said, I'm Fletcher Chamberlin, FEI’s Treasurer and Communications Director. With me today at our headquarters in Oregon are Don Kania, our President and CEO; and Ray Link, EVP and Chief Financial Officer.

Before we begin our presentation, we have the regular housekeeping matters to take care of. This call contains forward-looking statements, to the extent that we discuss expectations about future corporate performance and guidance customer orders or revenue growth, performance by product and market, margin improvement, market developments and opportunities, the competitive landscape, product and technological developments, product introductions and shipment schedules, the effects of future movements in foreign exchange rates, cost savings and restructuring, changes in our effective tax rate or other future events and plans. Those statements are considered forward-looking, subject to risks and uncertainties that could cause our actual results to differ from the forward-looking statements made.

Our risk factors are cited in more detail in today’s press release and in our most recent 10-K, 10-Q, and 8-K documents and other filings with the SEC. Investors are urged to read these documents. Copies are available free of charge on the SEC’s website at www.sec.gov or on our website or from our Investor Relations department at 503-726-7710.

The company assumes no duty to update forward-looking statements set out in those documents or made on this call. This call is the property of FEI Company. It will be archived in the Investor Relations section of our corporate website at www.fei.com.

I’ll now turn the call over to Ray for a review of the financials and then, Don will comment on the markets and the business environment.

Ray Link

Thank you, Fletcher and good afternoon, everyone. Welcome to our second quarter call. I'll go through the financial report and guidance in detail and then turn the call back over to Don.

We had another solid quarter. Operating performance was similar to the first quarter, but EPS was reduced by a larger restructuring charge, expected higher non-operating expense and a higher tax rate. Bookings were very strong, up 21% from the first quarter and 12% from last year, giving us a record second quarter. Don will give you more color on that in a moment.

Revenue and earnings were in line with our expectations, given the severe decline in the global economy and capital equipment markets, our top line had settled very well and we continued to manage our expenses effectively.

In addition, gross margins improved compared to last year’s second quarter and was at 40%. Operating expenses were down from both the first quarter and the year-ago second quarter. Non-operating expense was greater than the first quarter. Nonetheless, this was our 13th consecutive quarter of positive GAAP earnings and once again, we generated cash in the quarter.

Turning now to the details, net bookings for the second quarter were $157.8 million, up 21% from a $130.6 million in the first quarter and up 12% from a $140.4 million in the last year’s second quarter. Q2 bookings total includes $6.4 million due to reevaluation of backlog for currency movements.

The Euro finished the quarter at 1.40 compared with 1.34 at the end of the first quarter. The backlog at the end of the quarter was $336.9 million, an all-time record high with approximately 90% scheduled for delivery within a year.

Net sales of a $140.3 million were down 1% from the first quarter and 9% from last year’s second quarter. About 60% of the decline from the year-ago quarter was due to the stronger dollar compared to the last year.

Research and Industry revenue of $55.2 million made up 39% of the total and was down 5% from the first quarter and 12% from last year’s second quarter. Life Science revenue of $19.6 million was made up 14% of the total and was down 6% from the first quarter and leveled at last year’s second quarter.

The Electronics revenue of $32.3 million was up 10% from the first quarter and down 14% from last year’s second quarter. In total, Electronics was 23% of revenue in the current quarter compared with 24% in the second quarter of ’08 and 41% two years ago in the second quarter of 2007. Electronics remains at cyclical lows as percentage of revenue.

Revenue for the US and Canada was down 27% sequentially and 26% compared with last year. European revenue was down 17% from the first quarter and 27% from the last year’s second quarter with the portion of that decline reflecting the stronger dollar.

Revenue from Asia and the rest of the world including Japan was up 58% sequentially and 36% compared with last year, due to the global nanotechnology spending and our strategic emphasis on that part of the world.

Read the rest of this transcript for free on seekingalpha.com