Duiven, the Netherlands, February 20, 2008, BE Semiconductor Industries N.V. ("the Company" or "Besi") (Euronext: BESI), a leading manufacturer of assembly equipment for the semiconductor industry, today announced its financial results for the fourth quarter and year ended December 31, 2007.
In June 2007, Besi announced a restructuring of its management and corporate structure in order to position the Company for future growth and profitability. In connection therewith, the Company recorded restructuring charges of € 4.5 million which it incurred over the second through fourth quarters of 2007. An analysis of the Company’s 2007 income statement and as adjusted for the impact of the restructuring is attached for the convenience of readers.
Key Highlights for Fourth Quarter 2007
• Revenues of € 43.9 million, up 22.3% over Q3-2007
• Orders of € 43.5 million, up 29.9% over Q3-2007
• Backlog of € 48.3 million versus € 48.7 million at September 30, 2007
• Gross margins of 37.1%, up from 34.8% in Q3-2007
• Operating expenses of € 15.1 million versus € 15.4 million in Q3-2007
• Net income of € 0.4 million or € 0.01 per basic and diluted share versus net loss of € 2.7 million in Q3-2007 or net loss of € 0.08 per basic and diluted share.
• Above Q4-2007 guidance for revenues, orders and profitability
Key Highlights for 2007
• Revenues decreased from € 191.2 million in 2006 to € 166.5 million in 2007 (12.9%)
• Net loss excluding restructuring charges of € 1.8 million, or € (0.05) per basic and diluted shared as compared to net income of € 10.8 million, or € 0.33 and € 0.31 per basic and diluted share, respectively, in 2006
• 10.5% decline in the euro versus the US dollar adversely affected revenue and profits
• Implementation of corporate and management restructuring plan including:
o Conversion to single, global management structure
o Reduction of North American and European headcount by 7%
o Reduction of product groups from 5 to 3
o Potential annual cost savings of € 6 million in 2008
o Inventory reduction of € 11.3 million
• Return to profitability in the fourth quarter
• Repurchase of 2.5 million ordinary shares during year, totaling approximately € 11 million
Results of Operations Fourth Quarter 2007
Revenues/Orders
Besi’s fourth quarter 2007 revenues increased by 22.3% as compared to the third quarter of 2007 and decreased by 11.3% as compared to the fourth quarter of 2006. The revenue increase in the fourth quarter of 2007 as compared to the third quarter of 2007 was due primarily to increased sales of die bonding equipment for array connect applications and packaging and plating equipment for leadframe assembly applications. Besi’s fourth quarter revenues were above the high end of guidance (+10-15%).
Orders for the fourth quarter of 2007 increased by € 10.0 million, or 29.9%, as compared to the third quarter of 2007 and 15.1% as compared to the fourth quarter of 2006. As compared to the third quarter of 2007, Besi’s fourth quarter orders increased due primarily to a significant increase in orders of molding and plating systems for leadframe assembly applications. On a customer basis, orders in the fourth quarter of 2007 as compared to the third quarter of 2007 reflected a 64% increase by subcontractors and a 5.6% increase by IDMs.
Backlog at December 31, 2007 was € 48.3 million as compared to € 48.7 million at September 30, 2007 and € 54.0 million at December 31, 2006. Approximately 46% and 54% of backlog at December 31, 2007 was represented by array connect and leadframe assembly applications, respectively. The Company’s book-to-bill ratio was 0.99 in the fourth quarter of 2007 as compared to 0.93 in the third quarter of 2007 and 0.76 in the fourth quarter of 2006.
Gross Margins/Operating Expenses
Besi’s gross margin for the fourth quarter of 2007 was 37.1% as compared to 34.8% in the third quarter of 2007 and 39.0% in the fourth quarter of 2006. The gross margin increase as compared to the third quarter of 2007 was due to efficiencies related to higher shipment levels, higher gross margins realized for leadframe applications, particularly trim and form and plating systems and the absence of restructuring charges. Besi’s gross margin was at the high end of guidance for the fourth quarter of 2007 (35-37%).
Besi’s operating expenses were € 15.1 million, or 34.4% of revenues, in the fourth quarter of 2007 as compared to € 15.4 million, or 42.9% of revenues, in the third quarter of 2007 and € 16.9 million, or 34.1% of revenues in the fourth quarter of 2006. In the fourth quarter of 2007, increased selling, general and administrative expenses due to higher warranty charges for singulation systems were more than offset by lower development spending, the capitalization of development costs in the period (€ 0.3 million) and lower restructuring charges (€ 0.2 million).
Results of Operations 2007/2006
Revenues/Orders
Revenues in 2007 decreased by 12.9% as compared to 2006 due to both a cyclical decline in semiconductor equipment orders as well as adverse consequences from Besi’s 2007 operational restructuring. In general, revenues and orders for Besi’s assembly equipment products were adversely affected in 2007 by weak demand from both IDMs and subcontractors as many customers deferred spending on new assembly technologies and opted to retrofit/extend current capacity instead of ordering additional assembly production capacity. Specifically, the year-over-year decrease was due primarily to a 28.1% decline in equipment sales for leadframe assembly applications, principally packaging and plating systems, as well as a 5.4% decline in shipments of assembly equipment for array connect applications, primarily singulation and die sorting equipment. Revenues were also adversely affected by a 10.5% decline of the US dollar versus the euro which caused, in certain instances, a loss of orders due to pricing considerations.
Orders in 2007 amounted to € 160.7 million, a decrease of € 27.7 million, or 14.7%, as compared to 2006. Order contraction in 2007 resulted from decreased demand for assembly equipment by IDMs and subcontractors (down by 19.7% and 7.5%, respectively) for both array connect and leadframe applications. The decline in assembly equipment orders generally was partially offset by an increase in bookings for die bonding systems. Orders for array connect and leadframe applications declined by 15.7% and 12.7%, respectively, in 2007 as compared to 2006. The book-to-bill ratio was 0.97 for 2007 as compared to 0.98 for 2006.
Gross Margins/Operating Expenses (Excluding Restructuring Charges)
Besi’s gross margin for 2007 excluding restructuring charges was 36.0% as compared to 39.1% in 2006. The gross margin decline was primarily due to (i) Besi’s decreased revenues generally, (ii) adverse currency movements and (iii) a decrease in array connect assembly gross margins, principally lower margins realized for die bonding, die sorting and singulation systems. The 2007 gross margin decline was partially offset by an improvement in packaging equipment margins as a result of efficiencies realized from the integration of Besi’s Dutch manufacturing operations and increased system production in Asia.
Besi’s operating expenses declined by € 0.6 million as compared to 2006. The decline was due to a 7.7% reduction in selling, general and administrative expenses resulting from (i) lower accounting, advisory and regulatory compliance expenses related to Besi’s de-listing from NASDAQ and the suspension of its reporting obligations to the US Securities and Exchange Commission and (ii) lower warranty and service expenses related to new product introductions and initial benefits of the 2007 restructuring. Lower selling, general and administrative expenses were partially offset in 2007 by increased research and development expenses due primarily to increased spending for the next generation singulation system, new RFID die bonding applications and enhancements to existing AMS-W and Compact packaging systems. During the year, total headcount, excluding temporary personnel, decreased by 24 people, or 2.1%, as a result of headcount terminations at North American and European operations partially offset by increased headcount at Asian locations with significantly lower costs per employee.
Financial Condition
Cash decreased from € 98 million at December 31, 2006 to € 74.8 million at December 31, 2007 as funds were used principally to repurchase € 11 million of ordinary shares during the year as well as retire € 8.5 million in debt outstanding. At December 31, 2007, total debt and capital lease obligations totaled € 71.5 million and equity stood at € 178.7 million. Capital spending increased from € 2.7 million in 2006 to € 4 million in 2007 principally related to additional equipment necessary for production activities and the construction of an IT center in Austria.
Comments
Richard W. Blickman, Chief Executive Officer of the Company, commented: “2007 was at the same time one of the most important and most difficult in the Company’s history. The year provided us a unique opportunity with the right people to fulfill our vision for a single, unified corporate and management structure in order to provide maximum business focus and the lowest cost base for our operations. In addition, we began an initiative to develop a range of products based on common platforms and common parts to significantly improve our future profitability and working capital management and to provide our customers the maximum cost advantage using our equipment. The creation of a single, unified, one company structure throughout our global operations is also critical in facilitating the addition of incremental products, processes and acquisitions to our current corporate platform.
After losses incurred in the second and third quarters of 2007 due to adverse industry conditions, adverse currency movements and € 4.5 million of restructuring charges, we returned to profitability in the fourth quarter of 2007 which included sales and order growth of 22.3% and 29.9%, respectively, in comparison to the third quarter. Based on our restructuring and the cost reduction actions initiated in 2007, we are enthusiastic about our prospects for 2008 in spite of uncertain economic conditions generally."
Outlook
At present, analyst forecasts for the assembly equipment industry in 2008 vary widely wherein the size of the market could range between no growth to a decline of 10% as compared to 2007. Besi’s major semiconductor customers remain cautious in approaching their 2008 capital equipment requirements in spite of higher capacity utilization rates currently at customer sites as compared to 2007. Caution results primarily from economic forecasts for limited growth or a possible recession affecting consumer, business and industrial electronics applications.
Consistent with peer group and customer forecasts for the first quarter of 2008, Besi expects revenues and orders for the first quarter of 2008 to decline between 5-10% as compared to the fourth quarter of 2007. The Company expects that its gross margins will range between 35-37% in the first quarter of 2008 as compared to 37.1% in the fourth quarter of 2007. In addition, operating expenses for the first quarter of 2008 are expected to decline by 5-10% from the € 15.1 million reported in the fourth quarter of 2007. Besi expects to be profitable in the first quarter of 2008. Capital expenditures are forecast to be approximately € 3 million in the first quarter of 2008.