FEI Reports Third Quarter 2003 Revenues of $88M

Oct. 23, 2003
Hillsboro, OR, October 23, 2003 FEI Company reported financial results for the latest quarter that included net sales and earnings per share that met guidance and orders that exceeded guidance. Net sales for the third quarter ended September 28, 2003 were $88.0 million, compared with net sales of $89.8 million in the second quarter of this year and net sales of $83.8 million in the third quarter of last year.

Hillsboro, OR, October 23, 2003 FEI Company reported financial results for the latest quarter that included net sales and earnings per share that met guidance and orders that exceeded guidance. Net sales for the third quarter ended September 28, 2003 were $88.0 million, compared with net sales of $89.8 million in the second quarter of this year and net sales of $83.8 million in the third quarter of last year.

GAAP earnings per share were $0.02, within the guidance range of $0.00 to $0.03, and included amortization of intangibles, the write-off of purchased in-process research and development costs and restructuring and reorganization costs totaling $3.4 million, or 0.07 per share.. Bookings in the third quarter totaled $92.7 million, resulting in a book-
to-bill ratio of 1.05 and an ending backlog of $117.9 million at September 28, 2003.

"Our third quarter order growth demonstrates the impact of the new products we have introduced in 2003," said Vahe A. Sarkissian, chairman, president and chief executive officer. "Early customer interest in our recently-introduced CLM-3D(TM) semiconductor metrology system reinforces our conviction that the need for in-line metrology solutions will expand as our customers move to smaller geometries and new materials. The Certus-3D DualBeam system for data storage metrology and our new family of small DualBeam systems for a wide range of research and industrial applications drove the order growth for the quarter."

Microelectronics revenues were approximately flat with the second quarter of 2003, where growth in high-end data storage and semiconductor systems was offset by quarterly volatility in the circuit edit and mask repair business. Electron Optics revenue declined 12% from the second quarter due to continued price pressure and seasonal weakness in Europe. Component revenue was up 29% sequentially, while Service revenue increased 5% from the second quarter of 2003, as the company's installed base continued to grow.

The gross margin for the quarter was 40.1% compared to 41.2% the previous quarter, due to continued competitive pricing pressure in some product segments and the increase in service revenues, partially offset by higher margins on software sales.

Operating expenses were up by $2.5 million compared to the previous quarter, primarily because of expenses associated with the acquisitions of the EGSoft division of Electroglas, Inc. and Revise, Inc. These transactions were closed early in the third quarter. Operating expenses also included amortization of intangibles of $1.4 million, the write-off of purchased in- process research and development costs of $1.2 million and restructuring and reorganization charges of $0.8 million; these costs reduced earnings by $0.07 per share.

GAAP earnings were $0.7 million or $0.02 per share basic and diluted, compared to $1.3 million or $0.04 per share in the preceding quarter and $1.4 million or $0.04 per share in the third quarter of last year. Cash used in operations was $8.2 million, and capital spending for the quarter was $5.8 million. Total cash, cash equivalents and investments decreased by $24.1 million over the previous quarter, primarily due to the cost of the acquisitions discussed above, reductions in current liabilities and increases in receivables and inventory. The company improved its current ratio and continued to maintain a strong balance sheet, with cash and investments of $311.2 million, convertible debt of $295.0 million and shareholders' equity of $321.9 million as of September 28, 2003.

"The semiconductor, data storage and industrial/institute markets we serve are driven by the promise and growth of nanotechnology, and the order pattern and tone in those markets has improved in recent quarters. These market factors, combined with our array of new products, make us cautiously optimistic about the outlook for our business," concluded Sarkissian.

FEI currently expects orders, revenues and earnings to increase in the fourth quarter 2003 compared with the third quarter. Orders are expected to be in the mid $90 million range and revenues are expected to be in the low $90 million range. GAAP earnings are anticipated to be in the range of $0.04 to $0.08 per share basic and diluted, including amortization of purchased intangibles of $1.4 million, or $0.03 per share.

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