FEI Company Reports Bookings and Net Sales Increase Over First Quarter of 2004

Net Income Is Up 81% Over First Quarter of 2004

Apr 27, 2005, 01:00 ET from FEI Company

    HILLSBORO, Ore., April 27 /PRNewswire-FirstCall/ -- FEI Company
 (Nasdaq:   FEIC) reported results for the first quarter of 2005 that include
 growth in bookings, net sales and net income compared with the first quarter
 of 2004, along with anticipated seasonal declines from the very strong totals
 in the fourth quarter of 2004.
     Net sales were $121.0 million for the first quarter ended April 3, 2005,
 an increase of 15% over net sales of $105.1 million in the first quarter of
 2004 and a decrease of 17% compared with net sales of $145.2 million for the
 fourth quarter of 2004.
     Bookings in the first quarter totaled $124.3 million, resulting in a book-
 to-bill ratio of 1.03 and a backlog of $163.4 million at the end of the
 quarter.  Bookings increased 15% compared with the first quarter of 2004 and
 decreased 14% compared with the record bookings recorded in the fourth quarter
 of 2004.
     GAAP net income for the first quarter of 2005 was $3.4 million, compared
 with net income of $1.9 million in the first quarter of 2004 and $8.4 million
 in the fourth quarter of 2004.  Fully diluted earnings per share in the latest
 quarter were $0.09, within the company's guidance range for the quarter, and
 compared with $0.05 in the first quarter of 2004 and $0.21 in the fourth
 quarter of 2004.
     Pro-forma earnings per share in the latest quarter were $0.11 per diluted
 share.  Investors should refer to the attached table for a reconciliation of
 GAAP earnings to pro-forma earnings.  Pro-forma earnings per share are
 calculated by excluding amortization of purchased intangibles and
 restructuring and relocation costs.
     "Our first quarter showed reasonable growth compared with last year, even
 as it reflected the expected seasonal decline after our very strong fourth
 quarter," said Vahe A. Sarkissian, chairman, president and chief executive
 officer of FEI.  "Nanotechnology research demand continued to be solid, with
 bookings from our Industry and Institute market growing 29% from last year's
 first quarter.  We also saw a recovery in demand from our data storage
 customers, offset by a sequential decline in bookings from the semiconductor
 industry, where several expected bookings were delayed until later in 2005.
     "We continue to invest in new product development and have recently
 announced key products, including our new Titan(TM) transmission electron
 microscope, which reaffirms our global leadership in ultra-high resolution
 microscopy.  We plan to build on this leadership as our markets demand more
 and more atomic-level images and information," concluded Sarkissian.
     By market, sales to Industry and Institute customers in the first quarter
 were up 4% from last year's first quarter and down 27% from the fourth quarter
 of 2004.  Industry and Institute bookings were up 29% compared with last
 year's first quarter and down 15% from the fourth quarter of 2004.  Sales to
 semiconductor customers in the first quarter of 2005 increased 42% compared to
 last year's first quarter and declined 12% from the fourth quarter of 2004.
 Semiconductor bookings were down 1% compared with a year ago and 21% compared
 with the fourth quarter.  Data storage sales in the first quarter were down
 35% compared with the first quarter a year ago, but increased 142% compared
 with the fourth quarter of 2004.  Data Storage bookings were up 14% compared
 with the first quarter of 2004 and 91% compared with the fourth quarter of
     Cash generated by operations was $29.6 million for the quarter.  Capital
 spending for the quarter was $4.4 million, and depreciation expense was $4.1
 million.  Inventory turnover was 3.1 times in the first quarter compared with
 2.6 times in last year's first quarter and 4.0 in the fourth quarter of 2004.
 Accounts receivable decreased by $24.9 million from the prior quarter, while
 days sales outstanding equaled 102 days, compared with 108 at the end of last
 year's first quarter and 101 days at the end of the fourth quarter.  The
 company continued to maintain a strong balance sheet, with cash and
 investments of $359.7 million, convertible debt of $295.0 million (due in
 2008) and shareholders' equity of $374.6 million as of April 3, 2005.
     Second Quarter 2005 Guidance
     FEI currently expects net sales for the second quarter to be in the range
 of $114 to $120 million.  The book-to-bill ratio is expected to be greater
 that 1.0.   GAAP earnings per share are anticipated to be in the range of
 $0.05 to $0.09 per share.  For reasons why the company's actual results may
 differ from guidance, please see the section titled "Safe Harbor Statement"
     Investor Conference Call -- 2:00 p.m. PDT Wednesday, April 27, 2005
     Parties interested in listening to FEI's quarterly conference call may do
 so by dialing 1-800-240-2430 (domestic, toll-free) or 1-303-262-2141
 (international) and asking for the FEI Q1 Earnings call. The call can also be
 accessed via the web by going to FEI's Investor Relations page at
 http://www.feicompany.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 11027551#.
     About FEI
     FEI's Tools for Nanotech(TM), featuring focused ion- and electron-beam
 technologies, deliver 3D characterization, analysis and modification
 capabilities with resolution down to the sub-Angstrom level. With R&D centers
 in North America and Europe and sales and service operations in more than 40
 countries around the world, FEI is bringing the nanoscale within the grasp of
 leading researchers and manufacturers and helping to turn some of the biggest
 ideas of this century into reality. More information can be found on the FEI
 website at: http://www.feicompany.com .
     Safe Harbor Statement
     This news release contains forward-looking statements that include our
 guidance for the second quarter of 2005 and statements about future bookings,
 revenue, earnings, profitability and future technology advances. Factors that
 could affect these forward-looking statements include, but are not limited to,
 the continued growth in nanotechnology markets in general and more
 particularly, the strength of the scientific research, semiconductor and data
 storage markets; cyclical changes in the data storage and semiconductor
 industries; fluctuations in foreign exchange and interest rates; our continued
 ability to maintain deferral accounting of hedge transactions; reduced
 profitability due to failure to achieve or sustain margin improvement or cost
 reductions; lower than expected customer orders; cancellation of customer
 orders; 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 to
 find acceptance with customers; delays in shipping new products; changes in
 the mix of products sold in a quarter; unfavorable business conditions and
 lack of growth in the general economy, both domestic and foreign;
 restructurings and reorganizations not presently anticipated; reduced sales
 due to geopolitical risks; changes in trade policies and tariff regulations;
 additional research and development expenses; inability to overcome
 technological barriers; additional selling, general and administrative
 expenses; additional costs related to future merger and acquisition activity;
 and failure of the company to achieve anticipated benefits of current or
 future acquisitions, including failure to achieve financial goals and
 integrate the acquisitions successfully.  Please also refer to our Form 10-K,
 Forms 10-Q 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.
                          FEI Company and Subsidiaries
                Condensed Consolidated Statements of Operations
                    (In thousands, except per share amounts)
                                                     Thirteen Weeks Ended
                                                   April 3,          April 4,
                                                     2005              2004
       Products                                    $95,753           $84,274
       Service                                      25,240            20,820
                Total net sales                    120,993           105,094
       Products                                     53,475            49,400
       Service                                      18,581            13,663
                Total cost of sales                 72,056            63,063
                Gross profit                        48,937            42,031
       Research and development                     16,187            13,567
       Selling, general and administrative          25,313            20,114
       Amortization of purchased technology          1,342             1,413
       Restructuring, reorganization and relocation     --               219
                Total operating expenses            42,842            35,313
     OPERATING INCOME                                6,095             6,718
       Interest income                               1,814             1,063
       Interest expense                             (2,507)           (2,468)
       Other expense, net                             (216)           (2,412)
                Total other expense, net              (909)           (3,817)
     INCOME BEFORE TAXES                             5,186             2,901
     INCOME TAX EXPENSE                              1,763             1,015
     NET INCOME                                     $3,423            $1,886
       Basic earnings per share                      $0.10             $0.06
       Diluted earnings per share                    $0.09             $0.05
       Basic                                        33,456            33,186
       Diluted                                      39,878            39,714
     The following table reconciles the specific items excluded from U.S. GAAP
 in the calculation of Pro-forma results for the periods indicated below:
     INCOME STATEMENT RECONCILIATION                  Thirteen Weeks Ended
                                                   April 3,          April 4,
                                                     2005              2004
     U.S. GAAP net income                           $3,423            $1,886
       Add back:
         Amortization of purchased technology        1,342             1,413
         Restructuring, reorganization and
          relocation                                    --               219
         Tax effect                                   (456)             (571)
     Pro-forma net income                           $4,309            $2,947
     DILUTED EPS RECONCILIATION                        Thirteen Weeks Ended
                                                    April 3,          April 4,
                                                      2005              2004
     U.S. GAAP diluted earnings per share            $0.09             $0.05
       Add back:
         Amortization of purchased technology         0.03              0.03
         Restructuring, reorganization and
          relocation                                    --              0.01
         Tax effect                                  (0.01)            (0.02)
     Pro-forma diluted earnings per share            $0.11             $0.07
     (1)  The press release and reconciliation table contain non-GAAP net
 income and earnings per share information (referred to as "Pro-forma") that
 excludes the impact of amortization of intangible assets; excludes
 restructuring costs in 2004; and adjusts tax expense using the tax rate in
 effect for the quarter reported.  Management of the company believes it is
 useful for investors to have this supplemental non-GAAP information because
 management evaluates the company's operating performance using this non-GAAP
 information and the non-GAAP measures are key measures used by management to
 plan and forecast business and assess overall company performance.  Further,
 non-GAAP net income and EPS are common performance tools used by the investor
 community to evaluate results.  Non-GAAP financial measures should not be
 considered as a substitute for measures of financial performance prepared in
 accordance with GAAP.  Also, the non-GAAP financial measures are not prepared
 in accordance with generally accepted accounting principles and may be
 different from non-GAAP financial measures used by other companies.
                          FEI Company and Subsidiaries
                     Condensed Consolidated Balance Sheets
                                 (In thousands)
                                                  April 3,        December 31,
     ASSETS                                         2005              2004
       Cash and cash equivalents                  $158,257          $130,682
       Short-term investments in
        marketable securities                      160,888           173,681
       Receivables                                 135,406           160,276
       Inventories                                  92,604            87,783
       Deferred tax assets                           7,395             8,365
       Other current assets                         22,936            29,804
                Total current assets               577,486           590,591
      SECURITIES                                    36,614            33,850
     LONG-TERM RESTRICTED CASH                       3,963             4,177
     PROPERTY PLANT AND EQUIPMENT, NET              71,270            71,550
     PURCHASED TECHNOLOGY, NET                      20,613            22,080
     GOODWILL                                       41,476            41,486
     DEFERRED TAX ASSETS                            24,409            18,555
     OTHER ASSETS, NET                              55,912            59,505
     TOTAL                                        $831,743          $841,794
       Accounts payable                            $41,266           $36,618
       Current accounts with Philips                 4,766             4,240
       Accrued payroll liabilities                  13,762            15,070
       Accrued warranty reserves                     9,784            10,052
       Deferred revenue                             44,809            43,349
       Income taxes payable                          5,390             7,962
       Accrued restructuring,
        reorganization and relocation                  706             1,020
       Other current liabilities                    30,875            37,128
                Total current liabilities          151,358           155,439
     CONVERTIBLE DEBT                              295,000           295,000
     DEFERRED TAX LIABILITIES                        5,638             6,412
     OTHER LIABILITIES                               5,195             5,373
       Preferred stock - 500 shares authorized;
        none issued and outstanding                     --                --
       Common stock - 70,000 shares authorized;
        33,493 and 33,413 shares issued and
        outstanding at April 3, 2005 and
        December 31, 2004                          317,777           315,632
       Accumulated earnings                         25,500            22,077
       Accumulated other comprehensive income       31,275            41,861
                Total shareholders' equity         374,552           379,570
     TOTAL                                        $831,743          $841,794
                                  FEI COMPANY
                               Supplemental Data
                    ($ In Millions Except Per Share Amounts)
                                              Q1 Ended    Q4 Ended    Q1 Ended
                                              4/3/2005   12/31/2004   4/4/2004
     Income Statement Highlights
      Consolidated sales                       $121.0      $145.2      $105.1
      Gross margin                              40.4%       40.3%       40.0%
      R & D spending                            $16.2       $15.6       $13.6
      R & D (% of sales)                        13.4%       10.7%       13.0%
      SG&A                                      $25.3       $27.8       $20.1
      SG&A (% of sales)                         20.9%       19.2%       19.0%
      Net income - GAAP                          $3.4        $8.4        $1.9
      Diluted earnings per share - GAAP         $0.09       $0.21       $0.06
     Sales by Business Segment
      MicroElectronics                          $57.7       $63.3       $42.4
      Electron Optics                           $36.1       $54.1       $39.3
      Service                                   $25.2       $25.5       $20.5
      Components                                 $2.0        $2.3        $3.0
     Sales by Market Sector
      Semiconductor                             $60.4       $69.0       $42.5
      Data Storage                               $7.5        $3.1       $11.6
      I & I                                     $53.1       $73.1       $51.0
     Sales by Geography
      North America                             $33.7       $44.5       $40.3
      Europe                                    $45.2       $49.5       $36.4
      Asia Pacific                              $42.1       $51.2       $28.4
      Total                                    $124.3      $143.8      $108.4
      Book to bill ratio                         1.03        0.99        1.03
      Backlog - total                          $163.3      $160.0      $125.0
      Backlog - Service                         $39.6       $31.0       $33.7
     Bookings by Business Segment
      MicroElectronics                          $40.1       $51.0       $46.3
      Electron Optics                           $48.4       $62.6       $32.6
      Service                                   $33.9       $28.4       $26.7
      Components                                 $1.9        $1.8        $2.8
     Bookings by Market Sector
      Semiconductor                             $48.2       $60.7       $48.7
      Data Storage                               $9.6        $5.0        $8.4
      I & I                                     $66.4       $78.1       $51.4
     Balance Sheet Highlights
      Cash, equivalents, investments,
       restricted cash                         $359.7      $342.4      $302.9
      Operating cash (used) generated           $29.6       $13.0      ($15.5)
      Accounts receivable                      $135.4      $160.3      $124.1
      Days sales outstanding (DSO)                102         101         108
      Inventory turnover                          3.1         4.0         2.6
      Inventories                               $92.6       $87.8       $98.0
      Property, plant and equipment             $71.3       $71.6       $69.4
      Fixed asset investment (during quarter)    $4.4        $4.3        $5.4
      Depreciation expense                       $4.1        $4.1        $3.7
      Current liabilities                      $151.4      $155.4      $109.0
      Working Capital                          $426.1      $435.2      $429.2
      Shareholders' equity                     $374.6      $379.6      $336.8
      Headcount (permanent and temporary)       1,787       1,756       1,675