FSI International, Inc. Announces Third Quarter and First Nine Months Fiscal 2003 Financial Results
Tuesday June 24, 4:02 pm ET
The Company Reports Significant Progress on its Realignment Initiatives
MINNEAPOLIS--(BUSINESS WIRE)--June 24, 2003--FSI International, Inc. (Nasdaq:FSII - News), a manufacturer of capital equipment for the microelectronics industry, today reported financial results for the fiscal 2003 third quarter and first nine months ended May 31, 2003.
Sales for the fiscal 2003 third quarter were $19.4 million, compared to $28.9 million for the same period of fiscal 2002. The Company's net loss for the third quarter of fiscal 2003 was $15.6 million or $0.53 per share (diluted), compared to a net loss of $8.9 million or $0.32 per share (diluted) for the third quarter of fiscal 2002.
Sales for the first nine months of fiscal 2003 were $66.7 million, compared to $113.4 million for the same period of fiscal 2002. The Company's net loss for the first nine months of fiscal 2003 was $76.7 million or $2.60 per share (diluted), compared to a net loss of $20.2 million or $0.75 per share (diluted) for the same period of fiscal 2002.
During the third quarter of fiscal 2003, the Company accrued severance costs of $2.3 million. These costs were allocated as follows: $336,000 in cost of goods sold; $1,030,000 in selling, general and administration expenses; and $978,000 in research and development expenses.
Realignment Initiatives
During the quarter the Company made significant progress on a number of realignment initiatives focused on lowering its breakeven sales level and cash burn rate, which include the following accomplishments:
Completed the transition from an affiliated distribution model in Europe and the Asia-Pacific region to a direct model.
Established the POLARIS® Support Services organization, enabling POLARIS® customers to extend the usage of these products.
Reorganized the Company's operations to focus on Surface Conditioning products and technologies.
"We expect the progress on these initiatives will contribute toward improved financial performance in the fiscal 2003 fourth quarter," stated Don Mitchell, FSI's chairman and chief executive officer.* "Our transition to a single technology focused company with a direct worldwide presence is now substantially complete."
Balance Sheet
The Company continues to maintain a strong balance sheet with approximately $133 million in assets, including $34 million in cash, restricted cash, cash equivalents and marketable securities. At the end of the third quarter, the Company had a current ratio of 2.8 to 1.0, no debt and a book value of $3.52 per share.
Non-Cash Charges
As discussed below, the Company reported significant non-cash charges during the first nine months of fiscal 2003. We believe the disclosure of these non-cash charges will assist investors as they measure the impact these charges had on the Company's financial performance during this period. The Company's liquidity and financial strength is easier to establish through a thorough understanding of these non-cash charges.
Microlithography Business Asset Write-Down
FSI previously announced that it will exit the resist processing market and that it will wind down the Company's Microlithography business over the next several quarters.* As a result, the Company recorded a non-cash asset write-down charge of $26.0 million or $0.88 per share in the second quarter of fiscal 2003. Approximately $19.0 million of the charge related to an inventory write-down that was recorded in cost of goods sold based on estimated future sales and recoverability given the decision to exit the resist processing market. The remaining $7.0 million was recorded as a write-down of the Microlithography business's fixed assets to fair value.
Transition to a Direct Distribution Organization
On October 9, 2002, the Company entered into a Transition Agreement with Metron Technology ("Metron") related to the early termination of its Distribution Agreements with Metron for Europe and the Asia-Pacific region, effective March 1, 2003. Under the terms of the Transition Agreement, FSI assumed direct sales, service and applications support and logistics responsibilities for its Surface Conditioning and Microlithography products in Europe and the Asia-Pacific region, while Metron continues to be the representative for FSI products in Israel.
Early Termination Fee
Under the terms of the Transition Agreement, the Company agreed to pay Metron an early termination fee of approximately $2.8 million or $0.09 per share using Company-owned Metron common shares. As a result, the Company recorded a non-cash charge of approximately $2.8 million included in operating expenses in the first quarter of fiscal 2003.
In connection with entering into the Transition Agreement, FSI advanced Metron $3.0 million in cash primarily related to its obligation under the Distribution Agreements to repurchase Metron's inventory. After completing a review of the inventory relative to FSI's repurchase obligations, it was determined that FSI's obligation to repurchase inventory was approximately $2.0 million. As a result, FSI delivered less than the 1.154 million Metron common shares originally contemplated. The actual number of shares returned to Metron was 567,105.
Impairment Charges
During the first quarter of 2003, the Company revalued its entire investment in Metron to $2.38 per share and recognized $10.2 million or $0.35 per share in non-cash impairment charges related to its investment in Metron common stock.
Outlook
Based on the backlog and deferred revenue levels at the end of the third quarter, the Company expects fourth quarter revenues of approximately $24 to $26 million and shipments of approximately $22 to $24 million.(a) Based upon the anticipated improved gross profit margin, lower operating expense run rate and significantly lower equity in losses of affiliates, the Company expects an approximate net loss in the $5 to $6 million range for the fourth quarter.(a)
Fiscal fourth quarter capital expenditures are expected to be less than $500,000, with depreciation and amortization expected to be approximately $3.0 million.(a) If the Company achieves its expectations, it expects to significantly reduce its cash burn rate in the fourth quarter to $2.0 to $3.0 million, as compared to approximately $9 million in each of the prior two quarters.(a) |
