Kulicke & Soffa Industries, Inc. (NASDAQ: KLIC) today announced preliminary financial results for its quarter ended September 30, 2006 ("fourth quarter") and its fiscal year ended September 30, 2006 ("fiscal year 2006").
Net revenue from continuing operations for the fourth quarter was $161.4 million compared to $162.0 million from continuing operations for the comparable year-ago quarter. Net income from continuing operations was $9.3 million or $0.14 per diluted share, versus net income from continuing operations for the year-ago quarter of $20.6 million or $0.31 per diluted share.
The lower net income from continuing operations in the fourth quarter on approximately the same net revenue as the comparable year-ago quarter is a result of lower equipment revenue and higher gold wire revenue, primarily from higher gold metal cost. The cost of the gold metal content of our wire is passed through to our customers without generating a profit. Included in net revenue from continuing operations for the fourth quarter is a $28.3 million gold metal revenue increase, from $52.1 million for the year-ago quarter to $80.4 million for the fourth quarter of 2006. These amounts are included in both our revenue and cost of sales.
Also included in the fourth quarter is expense for equity-based compensation from stock options of $1.0 million or $0.01 per diluted share. As previously reported, the Company began recording equity-based compensation expense during the first quarter of 2006. Equity-based compensation expense was not recorded in any period prior to fiscal year 2006.
As part of the fiscal year 2006 financial close process, the Company determined that it understated earnings in prior fiscal years in an aggregate amount not expected to exceed $4 million. The Company is currently assessing the impact on current and prior periods, as well as the impact on controls over financial reporting. The Company will complete its assessment before filing its annual report on Form 10-K on December 14, 2006. The impact of this assessment is not reflected in the financials presented in this earnings release.
Scott Kulicke, chairman and chief executive officer, commented on the fourth quarter, "Equipment revenue exceeded the high end of our guidance by approximately $4 million. This represents a more modest decline in revenue during the September quarter than originally forecasted. This level of business supports our belief that our customers did not over-spend for capacity during previous peak periods, so we did not see a marked correction for excess capacity, as some industry analysts had predicted. Our positive net income for this period marks the 12th sequential quarter of profitability, or break-even, from continuing operations.
He added, "In addition to our current product portfolio, we are focused on the recently announced acquisition of Alphasem, which represents an investment in growth at a reasonable price. We believe this potential revenue growth, when coupled with the proven profitability from our continuing operations, is a combination that will allow K&S to continue generating good financial results throughout the semiconductor business cycle."
For fiscal year 2006, net revenue from continuing operations was $696.3 million compared to net revenue from continuing operations of $475.5 million for the prior year. Net income from continuing operations was $73.4 million or $1.09 per diluted share, compared to net income from continuing operations of $33.3 million or $0.52 per diluted share for the prior year.
Fourth Fiscal Quarter Review and Highlights:
Technology & Manufacturing
-- The K&S CupraPlus capillary completed its final R&D milestones for
release in the December quarter. This new tool is used in copper wire
bonding and expected to improve customers' throughput and process yields.
-- The K&S AT Premier gold bumping machine is currently being used by a
customer to develop methods for producing non-wire bonded, 3-D (stacked)
packages. This represents a unique opportunity for K&S to provide
technology to its customers outside of traditional wire bonded packaging.
Key Product Trends
-- K&S wire bonders gained incremental sales at several customers in
Taiwan during the fourth quarter. These customers represent a previously
underserved market as they had not taken delivery of any K&S wire bonders
in the previous quarter and historically purchase our competitors'
equipment. Some of these customers represent the results of the K&S sales
team's efforts to better serve smaller Taiwanese subcons that have future
growth potential.
-- Gold wire unit shipments for the fourth quarter increased to the
highest level ever shipped in a single quarter.
-- The K&S AT Premier is currently installed at 14 different customers,
applying gold bumps to wafers for the purpose of developing advanced
packages, primarily for camera sensors, high brightness LEDs (HBLEDs), and
memory devices.
Financial Review
-- Cash and cash equivalents, restricted cash, and short-term investments
increased $47.8 million, from $109.5 million in the prior quarter to $157.3
million in the fourth quarter.
-- Gross profit margin declined 1.5% from the prior quarter to 24.2% in
the fourth quarter. The decline in gross profit margin was the result of
higher gold metal revenue for the fourth fiscal quarter.
-- K&S Equipment segment maintained its gross profit margin on lower
revenue in the fourth quarter. The prior quarter's gross profit margin was
43.4% on $71.1 million in sales compared to 43.1% on $54.9 million in the
fourth fiscal quarter.
-- Precious metal revenue for our gold wire products was $80.4 million
for the fourth quarter compared to $75.3 million in the prior quarter.
These same amounts are also included in the cost of sales.
Revenue Forecast for First Fiscal Quarter:
Mr. Kulicke provided the following revenue forecast, "We expect some further decline in wire bonder sales in the December quarter. Gold metal pass through, which is included in our revenue, is expected to be somewhat lower than the September quarter. Those two factors are partially offset by our recent acquisition of Alphasem. Die bonders will increase our equipment revenue by providing approximately two months of sales in the quarter. Therefore we expect revenue in the December quarter to be $140 to $150 million, including approximately $7 million of die bonder revenue. We look forward to demonstrating good financial performance in fiscal year 2007."
Earnings Conference Call Details
A conference call to discuss these results will be held today, November 16, 2006 beginning at 9:00 AM EST. Interested participants may call 877-407-8037 for the teleconference or log on to http://www.kns.com/investors/events for listen-only mode. A replay will be available approximately one hour after the completion of the call by calling toll free 877-660-6853 or internationally 201-612-7415 and using the following replay access codes 5521 (account number) and 218650 (conference number). A replay will also be available on the K&S web site at http://www.kns.com/investors. The replay will be available via phone and web site through January 12, 2007.
About Kulicke & Soffa
Kulicke & Soffa (NASDAQ: KLIC) is the world's leading supplier of semiconductor assembly equipment, materials, and technology. K&S provides wire bonders, capillaries, wire, die bonders, and die collets for all types of semiconductor packages using wire as the internal electrical interconnections. K&S is the only major supplier to the semiconductor assembly industry that provides customers with semiconductor assembly equipment along with the complementing packaging materials and process technology that enable our customers to achieve the highest possible yields and throughput. The ability to provide these assembly related products is unique to Kulicke & Soffa, and allows us to develop system solutions to the new technology challenges inherent in assembling and packaging next-generation semiconductor devices. Kulicke & Soffa's web site address is http://www.kns.com.
Caution Concerning Forward-Looking Statements
In addition to historical statements, this press release contains statements relating to future events and our future results. These statements are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, and include, but are not limited to, statements that relate to our future revenue, revenue growth, sales, profitability, financial results, unit volumes, product development, release of products, industry forecasts, the semiconductor business cycle, the price of gold metal, projected continued demand for our products, and our customers' growth potential. While these forward-looking statements represent our judgments and future expectations concerning our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: the risk of failure to successfully manage our operations; the risk that anticipated orders may not materialize or that orders received may be postponed or canceled, generally without charges; the volatility in the demand for semiconductors and our products and services; the risk that we may not be able to develop and manufacture new products and product enhancements on a timely and cost effective basis; acts of terrorism and violence; overall global economic conditions; risks, such as changes in trade regulations, currency fluctuations, political instability and war, associated with a substantial foreign customer and supplier base and substantial foreign manufacturing operations; potential instability in foreign capital markets; and the factors listed or discussed in Kulicke and Soffa Industries, Inc. 2005 Annual report on Form 10-K and our other filings with the Securities and Exchange Commission. Kulicke & Soffa Industries is under no obligation to (and expressly disclaims any obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
KULICKE & SOFFA INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share and employee data)
(Unaudited)
Three months ended Fiscal year ended
September September September September
30, 30, 30, 30,
---------- ---------- ---------- ----------
2005 2006 2005 2006
---------- ---------- ---------- ----------
Net revenue $ 161,973 $ 161,415 $ 475,542 $ 696,311
Cost of sales 111,194 122,368 339,461 503,257
---------- ---------- ---------- ----------
Gross profit 50,779 39,047 136,081 193,054
---------- ---------- ---------- ----------
Selling, general and
administrative 19,327 19,575 69,525 81,657
Research and development,
net 7,475 9,552 28,495 37,657
Gain on sale of assets (127) - (1,690) (4,544)
---------- ---------- ---------- ----------
Operating expenses 26,675 29,127 96,330 114,770
---------- ---------- ---------- ----------
Income from operations 24,104 9,920 39,751 78,284
Interest income 664 1,301 2,228 3,921
Interest expense (960) (634) (3,806) (3,126)
Gain on early
extinguishment of debt - - 4,040
---------- ---------- ---------- ----------
Income from continuing
operations before income
taxes 23,808 10,587 38,173 83,119
Provision for income taxes 3,247 1,315 4,836 9,769
---------- ---------- ---------- ----------
Net income from continuing
operations 20,561 9,272 33,337 73,350
---------- ---------- ---------- ----------
Loss from discontinued
operations (7,938) (121) (137,419) (24,862)
---------- ---------- ---------- ----------
Net income (loss) $ 12,623 $ 9,151 $ (104,082) $ 48,488
========== ========== ========== ==========
Net income per share from
continuing operations:
Basic $ 0.40 $ 0.16 $ 0.65 $ 1.33
========== ========== ========== ==========
Diluted $ 0.31 $ 0.14 $ 0.52 $ 1.09
========== ========== ========== ==========
Loss per share from
discontinued operations:
Basic $ (0.16) $ - $ (2.67) $ (0.45)
========== ========== ========== ==========
Diluted $ (0.12) $ - $ (2.03) $ (0.37)
========== ========== ========== ==========
Net income (loss) per
share:
Basic $ 0.24 $ 0.16 $ (2.02) $ 0.88
========== ========== ========== ==========
Diluted $ 0.19 $ 0.14 $ (1.51) $ 0.72
========== ========== ========== ==========
Weighted average shares
outstanding:
Basic 51,939 57,100 51,619 55,089
Diluted 68,634 69,157 67,662 68,881
Stock-based compensation
expense included in
continuing operations:
Cost of sales $ - $ 79 $ - $ 619
Selling, general and
administrative - 747 - 2,996
Research and
development - 188 - 1,120
---------- ---------- ---------- ----------
Total continuing operations $ - $ 1,014 $ - $ 4,735
========== ========== ========== ==========
Discontinued
operations $ - $ - $ - $ 628
========== ========== ========== ==========
Three months ended Fiscal year ended
September September September September
30, 30, 30, 30,
---------- ---------- ---------- ----------
Additional financial data: 2005 2006 2005 2006
---------- ---------- ---------- ----------
Depreciation and
amortization
Continuing operations $ 2,986 $ 2,078 $ 12,746 $ 9,523
Discontinued operations $ 1,552 $ - $ 12,665 $ 2,314
Capital expenditures
Continuing operations $ 2,177 $ 1,404 $ 7,788 $ 9,496
Discontinued operations $ 1,618 $ - $ 4,717 $ 753
September September
30, 30,
---------- ----------
2005 2006
---------- ----------
Backlog of orders
Continuing operations $ 92,000 $ 56,000
Discontinued operations 7,000 -
Number of employees
Continuing operations 2,627 2,492
Transition personnel - 159
Discontinued operations 983 -
Note - Statements of operations and additional financial data reflect
accounting for the sale of the company's Test business as a
discontinued operation in accordance with the requirements of
FAS 144.
KULICKE & SOFFA INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
(Unaudited)
September September
30, 30,
2005 2006
---------- ----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 79,455 $ 133,967
Restricted cash 1,381 1,973
Short-term investments 14,533 21,343
Accounts and notes receivable (less allowance for
doubtful accounts: 9/30/05 - $2,086;
9/30/06 - $1,426) 128,376 120,651
Inventories, net 46,115 47,866
Assets held for sale - 3,832
Current assets of discontinued operations 23,828 -
Prepaid expenses and other current assets 10,267 10,446
Deferred income taxes 1,605 3,990
---------- ----------
TOTAL CURRENT ASSETS 305,560 344,068
Property, plant and equipment, net 32,428 28,487
Goodwill 29,684 29,684
Non-current assets of discontinued operations 12,704 -
Other assets 6,120 3,262
---------- ----------
TOTAL ASSETS $ 386,496 $ 405,501
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current portion of long term debt $ 10,119 $ -
Accounts payable 53,498 46,469
Accrued expenses 32,748 33,084
Income taxes payable 17,196 19,218
Liabilities held for sale - -
Current liabilities of discontinued operations 5,950 -
---------- ----------
TOTAL CURRENT LIABILITIES 119,511 98,771
Long term debt 270,000 195,000
Other liabilities 6,389 10,641
Deferred taxes 22,344 25,465
---------- ----------
TOTAL LIABILITIES 418,244 329,877
---------- ----------
Commitments and contingencies - -
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, without par value 218,426 277,194
Accumulated deficit (243,994) (195,506)
Accumulated other comprehensive loss (6,180) (6,064)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (31,748) 75,624
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY (DEFICIT) $ 386,496 $ 405,501
========== ==========
Note - Amounts have been adjusted to reflect accounting for the sale of the
company's Test business as a discontinued operation in accordance
with the requirements of FAS 144.
KULICKE & SOFFA INDUSTRIES, INC.
OPERATING RESULTS BY BUSINESS SEGMENT
(In thousands)
(Unaudited)
Fiscal 2006:
Packaging
Equipment Materials
Three months ended September 30, Segment Segment Consolidated
2006: ------------ ------------- ------------
Net revenue $ 54,900 $ 106,515 $ 161,415
Cost of sales 31,263 91,105 122,368
------------ ------------- ------------
Gross profit 23,637 15,410 39,047
Operating costs 20,001 9,126 29,127
------------ ------------- ------------
Income from continuing operations $ 3,636 $ 6,284 $ 9,920
============ ============= ============
Fiscal year ended September 30,
2006:
Net revenue $ 319,788 $ 376,523 $ 696,311
Cost of sales 181,980 321,277 503,257
------------ ------------- ------------
Gross profit 137,808 55,246 193,054
Operating costs 85,640 33,674 119,314
Gain on sale of assets - - (4,544)
------------ ------------- ------------
Income from continuing operations $ 52,168 $ 21,572 $ 78,284
============ ============= ============
Fiscal 2005:
Packaging
Equipment Materials
Three months ended September 30, Segment Segment Consolidated
2005: ------------ ------------- ------------
Net revenue $ 84,892 $ 77,081 $ 161,973
Cost of sales 47,632 63,562 111,194
------------ ------------- ------------
Gross profit 37,260 13,519 50,779
Operating costs 19,345 7,457 26,802
Gain on sale of assets (127) - (127)
------------ ------------- ------------
Income from continuing operations $ 18,042 $ 6,062 $ 24,104
============ ============= ============
Fiscal year ended September 30,
2005:
Net revenue $ 201,608 $ 273,934 $ 475,542
Cost of sales 115,558 223,903 339,461
------------ ------------- ------------
Gross profit 86,050 50,031 136,081
Operating costs 67,296 30,724 98,020
Gain on sale of assets (1,690) - (1,690)
------------ ------------- ------------
Income from continuing operations $ 20,444 $ 19,307 $ 39,751
============ ============= ============
