SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File No. 0-22780
FEI COMPANY
(Exact name of registrant as specified in its charter)
Oregon 93-0621989
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
7451 NE Evergreen Parkway
Hillsboro, Oregon 97124-5830
(Address of principal executive offices) (Zip Code)
(503) 640-7500
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 7,773,370 shares of
Common Stock were outstanding at May 10, 1996.
<PAGE>
INDEX TO FORM 10-Q/A
Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996 (unaudited)
and December 31, 1995..................................... 1
Consolidated Statements of Operations - Three Months Ended
March 31, 1996 and March 31, 1995 (unaudited)............. 2
Consolidated Statements of Changes in Shareholders'
Equity - Three Months Ended March 31, 1996 (unaudited)
and Year Ended December 31, 1995 ......................... 3
Consolidated Statements of Cash Flows - Three Months ended
March 31, 1996 (unaudited) and March 31, 1995 (unaudited). 4
Notes to Consolidated Financial Statements (unaudited).... 5
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K........................ 8
Signatures............................................................. 9
<PAGE>
PART I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(In Thousands except share data)
ASSETS
December 31, March 31,
1995 1996
------------ --------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 3) $ 2,700 $ 3,137
Investments (Note 4) 4,961 3,750
Receivables (Note 5) 13,769 15,550
Tax refund receivable 36 36
Inventories (Note 6) 10,425 12,259
Prepaid expenses 159 185
Deferred income taxes 626 763
------- -------
Total current assets 32,676 35,680
INVESTMENTS (Note 4) 2,540 2,507
EQUIPMENT 4,604 4,749
LEASE RECEIVABLES 2,663 2,457
OTHER ASSETS 2,159 2,353
TOTAL $44,642 $47,746
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,597 $ 4,739
Accrued payroll liabilities 606 719
Accrued warranty reserves 892 1,133
Deferred revenue 434 497
Income taxes payable 870 655
Other current liabilities 871 910
------- -------
Total current liabilities 6,270 8,653
COMMITMENTS AND CONTINGENCIES -- --
LONG-TERM DEBT (Note 8) 3,500 --
DEFERRED INCOME TAXES 450 415
SHAREHOLDERS' EQUITY: (Note 7)
Preferred stock - 500,000 shares authorized;
none issued and outstanding -- --
Common stock - 15,000,000 shares authorized;
7,222,394 and 7,701,925 shares issued and outstanding 27,150 30,746
Warrants - 200,001 issued and outstanding 59 59
Retained earnings 7,099 7,844
Unrealized gain on marketable securities 96 17
Cumulative foreign currency translation adjustment 18 12
------- -------
Total shareholders' equity 34,422 38,678
------- -------
TOTAL $44,642 $47,746
======= =======
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands except share data)
(Unaudited)
Three Months Ended
March 31,
-------------------------
1995 1996
---- ----
NET SALES $ 8,920 $ 11,607
COST OF SALES 5,277 7,234
----------- -----------
Gross profit 3,643 4,373
OPERATING EXPENSES:
Research and development 595 898
Selling and marketing 994 1,412
General and administrative 617 1,000
----------- -----------
Total operating expenses 2,206 3,310
OPERATING INCOME 1,437 1,063
OTHER INCOME (EXPENSE):
Foreign currency loss (374) (21)
Interest income 88 195
Interest expense (240) (62)
Other (27) (6)
----------- -----------
Total other income (expense) (553) 106
INCOME BEFORE TAXES 884 1,169
TAX EXPENSE 359 424
----------- -----------
NET INCOME $ 525 $ 745
=========== ===========
NET INCOME PER SHARE $ 0.10 $ 0.10
=========== ===========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 5,101,315 7,831,332
=========== ===========
See notes to consolidated financial statements.
2
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In Thousands except share data)
<TABLE>
<CAPTION>
Cumulative
Unrealized Foreign
Gain on Currency
Common Stock Warrants Retained Marketable Translation
Shares Amount Shares Amount Earnings Securities Adjustment Total
------ ------ ------ ------ -------- ---------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 4,363,705 $ 5,549 400,001 $ 119 $ 3,358 $ -- $ 21 $ 9,047
Net income 3,741 3,741
Proceeds from exercise of
options for 210,539 shares of
common stock 210,539 393 393
Proceeds from sale of 2,500,000
shares of common stock, less
$2,602 costs of issuance 2,500,000 21,148 21,148
Exercise of 200,000 warrants
into 148,150 shares of common
stock 148,150 60 (200,000) (60) 0
Unrealized gain on marketable
securities 96 96
Foreign currency translation
adjustment (3) (3)
--------------------------------------------------------------------------------------------
BALANCE, December 31, 1995 7,222,394 27,150 200,001 59 7,099 96 18 34,422
Net income (unaudited) 745 745
Proceeds from exercise of
options for 12,864 shares of
common stock (unaudited) 12,864 96 96
Exercise of convertible options for
466,667 shares of common
stock (unaudited) 466,667 3,500 3,500
Unrealized loss on marketable
securities (unaudited) (79) (79)
Foreign currency translation
adjustment (unaudited) (6) (6)
--------------------------------------------------------------------------------------------
BALANCE, March 31, 1996
(unaudited) 7,701,925 $ 30,746 200,001 $ 59 $ 7,844 $ 17 $ 12 $38,678
============================================================================================
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1995 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 525 $ 745
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 330 361
Deferred taxes on income 164 (172)
Decrease (increase) in assets:
Receivables (576) (1,781)
Inventories (720) (1,820)
Prepaid expenses and tax refund receivable (54) (26)
Other assets -- (35)
Increase (decrease) in liabilities:
Accounts payable 1,784 2,142
Accrued payroll liabilities 95 113
Accrued warranty reserves (49) 241
Deferred revenue 167 63
Income taxes payable 159 (215)
Other current liabilities 236 39
------- -------
Net cash provided by (used in) operating activities 2,061 (345)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (69) (472)
Investment in software development (28) (207)
Purchase of investments -- (322)
Proceeds from sale of investments -- 1,487
(Investment in) reduction of lease receivables (725) 206
Net disposals of equipment 25 --
------- -------
Net cash provided by (used in) investing activities (797) 692
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) line of credit
and notes payable (1,926) --
Proceeds from exercise of stock options and warrants 6 96
Proceeds from issuance of long term debt 1,000 --
Payments on long term debt (Note 8) (109) --
------- -------
Net cash provided by (used in) financing activities (1,029) 96
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 25 (6)
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 260 437
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 192 2,700
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 452 $ 3,137
======= =======
SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest $ 180 $ 62
Income taxes paid -- 810
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of long-term debt into 466,667
shares of the Company's common stock $ -- $ 3,500
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
FEI COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. NATURE OF BUSINESS
FEI Company and its wholly owned subsidiaries (the "Company") design,
manufacture and market focused ion beam ("FIB") workstations and components
based on field emission technology. The Company sells its FIB workstations
principally to integrated circuit manufacturers and sells components to
manufacturers of electron microscopes and other devices incorporating field
emission technology.
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and Article 2 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for fair
presentation have been included. The accompanying consolidated financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1995.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the reported period. Actual results could differ from estimates.
3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following (in thousands):
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
Cash $ 590 $ 417
Money market investments 2,110 2,720
-------- --------
Total cash and cash equivalents $ 2,700 $ 3,137
======= =======
4. INVESTMENTS
Investments, classified as available for sale, consist of the following (in
thousands):
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
DECEMBER 31, 1995
- -----------------
<S> <C> <C> <C> <C>
Debt securities issued by the United
States Treasury and other US government
corporations and agencies $ 1,908 $ 24 $ -- $ 1,932
Debt securities issued by states of the
United States and political subdivisions
thereof 3,508 56 -- 3,564
Corporate obligations 989 1 -- 990
Preferred stock 1,000 15 -- 1,015
---------- ---------- ---------- ---------
Total $ 7,405 $ 96 $ -- $ 7,501
========== ========== ========== =========
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
FEI COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
MARCH 31, 1996
- --------------
<S> <C> <C> <C> <C>
Debt securities issued by the United
States Treasury and other US government
corporations and agencies $ 1,914 $ 7 $ -- $ 1,921
Debt securities issued by states of the
United States and political subdivisions
thereof 2,826 5 -- 2,831
Corporate obligations 500 -- -- 500
Preferred stock 1,000 5 -- 1,005
---------- ---------- ---------- ---------
Total $ 6,240 $ 17 $ -- $ 6,257
========== ========== ========== =========
</TABLE>
These investments have been reported as follows:
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
Current assets - investments $ 4,961 $ 3,750
Noncurrent assets - investments 2,540 2,507
-------- --------
Total $ 7,501 $ 6,257
======= =======
5. RECEIVABLES
Receivables consist of the following (in thousands):
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
Trade $ 12,000 $ 13,922
Foreign tax deposit and other 587 321
Current portion of lease receivable 1,277 1,404
----------- ---------
Subtotal 13,864 15,647
Allowance for doubtful accounts (95) (97)
----------- ---------
Total receivables $ 13,769 $ 15,550
=========== =========
6
<PAGE>
FEI COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
6. INVENTORIES
Inventories consist of the following (in thousands):
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
Raw materials and assembled parts $ 7,011 $ 6,989
Work in process 1,866 3,211
Finished goods 1,626 2,148
----------- ---------
Subtotal 10,503 12,348
Inventory reserves (78) (89)
----------- ---------
Total inventories $ 10,425 $ 12,259
=========== =========
7. STOCK SALE
On June 1, 1995 the Company completed its initial public offering ("IPO")
by issuing 2,500,000 shares of common stock at $9.50 per share, and
proceeds, net of underwriters commissions and other expenses, amounted to
$21,148,000. Approximately $6,165,000 of the proceeds were used to pay off
the line of credit and lease finance line with the bank.
8. LONG-TERM DEBT
On March 1, 1996 the Company's $3,500,000 note payable to a non-bank lender
was converted into 466,667 shares of common stock. If the conversion right
had been exercised on January 1, 1996, net income for the three months
ended March 31, 1996 would have increased approximately $40,000, resulting
in net income of $785,000, or $0.10 per share.
9. LITIGATION
On May 12, 1995, Micrion Corporation ("Micrion"), a principal competitor of
the Company, filed suit against the Company alleging infringement of a
patent issued to Micrion relating to the use of an electron gun to
neutralize the positive charge that can develop with the use of an ion beam
in FIB workstations. Micrion seeks an injunction against the alleged
infringement of the Micrion patent, damages of at least $1,000,000, treble
damages for infringement of the Micrion patent, attorney's fees and other
damages. The Company believes it has valid defenses to Micrion's claims.
The Company initiated a proceeding with the American Arbitration
Association seeking to arbitrate Micrion's non-patent claims. In response
to motions filed by the Company in the Court and the United States District
Court for the District of Oregon, Micrion was ordered to arbitrate these
matters in Oregon, and the Court action has been stayed with respect to
these matters. The Company has filed an Answer and Counterclaim in the
Court, asserting that the patent is not infringed and is invalid.
The Company believes it has valid defenses and intends to vigorously defend
the litigation. The Company believes the likelihood of a material finding
in favor of Micrion is remote and, accordingly, has not recorded a
liability with respect to this contingency. Nonetheless, it is not
possible to predict the outcome of this matter with certainty.
7
<PAGE>
10. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 123
("SFAS No. 123"), "Accounting for Stock-Based Compensation," effective
January 1, 1996. SFAS No. 123 defines a fair value based method of
accounting for employee stock options or similar instruments and permits
companies to adopt that method of accounting for all of their employee
stock compensation plans. However, it also allows a company to continue to
measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25 ("APB No. 25"),
"Accounting for Stock Issued to Employees." The Company has elected to
continue to measure compensation cost in conformity with APB No. 25 and to
make pro forma disclosures of net income and earnings per share in its
annual report on Form 10-K for the year ended December 31, 1996, as if the
fair value based method of accounting defined in SFAS No. 123 had been
applied.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the period for which
this report is filed.
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FEI COMPANY
(Registrant)
Dated: August 7, 1996 WILLIAM G. LANGLEY
-------------------------------------
William G. Langley
President, Chief Financial Officer
and Authorized Officer
9
<PAGE>
Exhibit Index
Sequential Page
Exhibit No. Description No.
11 Statement of Computation of Per Share Earnings
27 Financial Data Schedule
EXHIBIT 11
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
WEIGHTED AVERAGE NUMBERS OF SHARES
The weighted average number of shares of common stock and common
stock equivalents, after adjusting for the two-for-three reverse
split, was determined as follows:
Outstanding options for common stock and convertible warrants and
options have been included in the calculation of common and common
equivalent shares using the treasury stock method based on an
assumed initial public offering price of $9.50 per share as the
market price for the three months ended March 31, 1995, and an
average market price of $11.23 per share for the three months ended
March 31, 1996.
Three Months Ended
March 31,
------------------
1995 1996
---- ----
Common stock:
Shares outstanding, beginning of period 4,363,704 7,222,394
Shares issued on exercise of options (1) 593 4,153
Shares issued on conversion of options from
debt agreement (5) -- 153,846
SEC SAB 83 shares (2) 269,499 198,286
--------- ---------
4,633,796 7,578,679
--------- ---------
Common stock equivalents:
Warrants (3) 266,667 146,562
Options (4) 200,852 106,091
--------- ---------
487,519 252,653
--------- ---------
Weighted average number of shares 5,101,315 7,831,332
========= =========
Net income $ 525 $ 745
========= =========
Net income per share $ 0.10 $ 0.10
========= =========
- -------------------
(1) Weighted average shares from exercise date of options granted under
1984 and 1995 Stock Incentive Plans.
(2) Employee options issued January 1, 1994
to April 21, 1995 105,278 126,911
Less shares reacquired under treasury stock
method 102,445 107,380
------- -------
2,833 19,531
Convertible options - debt agreement (5) 266,666 178,755
------- -------
Net SAB No. 83 shares 269,499 198,286
------- -------
(3) Warrants issued September 1, 1988 and October 3, 1988 for 200,000
shares each, less shares reacquired under treasury stock method.
(4) Options granted on annual basis under plan, less shares reacquired
under treasury stock method.
<PAGE>
(5) Convertible options/debt agreements issued prior to January 1, 1994
are excluded from SAB No. 83 shares. Further, such options are
anti-dilutive and, therefore, presentation of fully diluted earnings
per share is not required. Share amounts are weighted average shares
from/to exercise date of option.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,137
<SECURITIES> 6,257
<RECEIVABLES> 15,647
<ALLOWANCES> 97
<INVENTORY> 12,259
<CURRENT-ASSETS> 35,680
<PP&E> 9,467
<DEPRECIATION> 4,718
<TOTAL-ASSETS> 47,746
<CURRENT-LIABILITIES> 8,653
<BONDS> 0
0
0
<COMMON> 30,746
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 47,746
<SALES> 11,607
<TOTAL-REVENUES> 11,607
<CGS> 7,234
<TOTAL-COSTS> 7,234
<OTHER-EXPENSES> 3,310
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> 1,169
<INCOME-TAX> 424
<INCOME-CONTINUING> 745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 745
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
