Kulicke & Soffa Reports Results for Its Fourth Quarter and Fiscal Year 2008

Kulicke & Soffa Industries, Inc. (NASDAQ:KLIC) ("K&S")today announced results for the quarter and fiscal year ended September 27, 2008. The company reported net revenues from continuing operations of $61.2 million and a net loss of $11.0 million, or $0.21 per share. This press release contains both GAAP and non-GAAP information.

During the fourth quarter, the Company announced the divestiture of its wire business, and accordingly, all operating results associated with this business are reported as discontinued operations. On a non-GAAP basis (excluding equity-based compensation, amortization of intangibles and related tax effects), the Company reported fourth quarter net revenue from continuing operations of $61.2 million, and a net loss of $10.3 million or $0.19 per share.

Quarterly GAAP Results

From Continuing Operations

Q4 2008

Change vs. Q4 2007

vs. Q3 2008

Net Revenue

$61.2 million

-60%

-16%

Gross Profit

$24.9 million

-59%

-16%

Gross Margin

40.6%

+34 basis points

-35 basis points

Net Income (Loss)

($11.0 million)

-143%

-51%

Net Margin

-18.0%

-3,472 basis points

-790 basis points

EPS - Diluted

$(0.21)

-153%

-50%

Quarterly Non-GAAP Measures 

From Continuing Operations

Q4 2008

Vs. Q4 2007

vs. Q3 2008

Net Revenue

$61.2 million

-60%

-16%

Gross Profit 

$24.9 million

-59%

-16%

Gross Margin

40.7%

+41 basis points

-33 basis points

Net Income (Loss)

($10.3 million)

-143%

-68%

Net Margin

-16.8%

-3,256 basis points

-835 basis points

EPS - Diluted

$(0.19)

-151%

-68%

Non-GAAP measures exclude: equity-based compensation from expenses; amortization of intangibles; and related tax effects (see reconciliations of GAAP results to Non-GAAP measures in the following financial schedules).

Commenting on the results, Scott Kulicke, Chairman and Chief Executive Officer, said, "Global economic conditions deteriorated rapidly toward the end of the September quarter, creating a very difficult business environment. Customers responded quickly to the weakening economic conditions, slowing bookings toward the end of that quarter and into the current quarter. We expect demand to remain weak and visibility to be poor through at least the first half of our fiscal 2009. For that reason, we expect net revenue of approximately $40 million during the first fiscal quarter of 2009."

"To cope with this difficult environment, we are taking appropriate steps to manage costs. These measures include a headcount reduction of 240 positions and a cancellation of annual salary increases scheduled for January. We expect theses measures to cost approximately $3 million, and to result in approximately $12 million in annualized savings."

Mr. Kulicke concluded, "Although we are heading into a difficult period, we believe we are well positioned to weather the turmoil. We started fiscal 2009 with $186 million in cash, and added about $70 million more after the sale of the wire business and the acquisition of Orthodyne. This balance sheet strength, combined with the strong market position of our core products, makes us confident in our ability to extend our position as a leading supplier of semiconductor assembly solutions."

Financial Details

Key Product Trends

Outlook for First Fiscal Quarter 2009

Fiscal Year 2008 Results

For the fiscal year 2008, K&S net revenue from continuing operations was $328.1 million, and we incurred a net loss of $19.6 million or $0.37 per share. On a non-GAAP basis, the Company reported fiscal 2008 net revenue of $328.1 million and a net loss of $8.4 million or $0.16 per share.

Annual GAAP Results

From Continuing Operations

FY 2008

FY 2007

Change

Net Revenue

$328.1 million

$370.5 million

-11.0%

Gross Profit

$133.8 million

$155.4 million

-14.0%

Gross Margin 

40.8%

42.0%

-117 basis points

Net Income (Loss)

($19.6 million)

$18.9 million

-204%

Net Margin

(6.1%)

5.1%

-1,107 basis points

EPS- Diluted

($0.37)

$0.29

-228%

Annual Non-GAAP Measures

From Continuing Operations

FY 2008

FY 2007 

Change 

Net Revenue

$328.1 million

$370.5 million

-11.0%

Gross Profit

$134.0 million

$155.7 million

-14.0%

Gross Margin

40.9%

42.0%

-115 basis points

Net Income (Loss)

($8.4 million)

$17.1 million

-149%

Net Margin

(2.5%)

4.6%

-716 basis points

EPS- Diluted

($0.16)

$0.27

-158%

Non-GAAP measures exclude: equity-based compensation from expenses; amortization of intangibles; U.S. pension plan termination charge; debt extinguishment; and related tax effects (see reconciliations of GAAP results to Non-GAAP measures in the following financial schedules). 

Earnings Conference Call Details

A conference call to discuss these results will be held today, November 13, 2008 beginning at 9:00 AM EDT. 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 302063 (replay ID number). A replay will also be available on the K&S web site at http://www.kns.com/investors/events . The replay will be available via phone and web site for a limited period.

Discussion of Non-GAAP Measures

This press release contains non-GAAP financial measures as a supplement to the consolidated financial results presented in accordance with GAAP. The Company believes certain non-GAAP measures provide investors with an additional, useful perspective on the Company's performance as seen through the eyes of management. Management uses non-GAAP financial measures along with GAAP financial results for: analyzing the performance of the Company's businesses; strategic and tactical decision making; and determining compensation. The Company does not consider non-GAAP financial measures to be a substitute for, or superior to, financial results presented in accordance with GAAP. All of the non-GAAP financial measures included herein are reconciled to the most directly comparable GAAP results in the following financial statements. These non-GAAP measures may be calculated differently from non-GAAP measures used by other companies. In addition, these non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and some of the adjustments reflect the exclusion of items that are recurring and will be reflected in the Company's GAAP financial results for the foreseeable future.

Exclusions from GAAP Results

The Company excludes the following from its GAAP results in presenting non-GAAP financial measures:

- Equity-based compensation expenses. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 123R, Share Based Payments, the Company recognizes the fair value of its equity-based compensation in expenses. Equity-based compensation consists of common stock, stock options and performance-based restricted stock granted under the Company's equity compensation plans. Equity-based compensation is a non-cash expense that can vary significantly in amount from period to period.

- Other. The exclusion of certain other non-GAAP amounts allows for improved comparisons of the Company's results to both prior periods and other companies. The Company excludes the following other items from non-GAAP measures as these items are not reflective of the performance of the Company's ongoing businesses:

- Tax Adjustment. Non-GAAP measures are tax adjusted using the GAAP tax rate associated with each quarterly period. The tax rate is calculated by dividing each quarter's GAAP tax expense by the GAAP net income for that quarter. Non-GAAP year-to-date measures are calculated by summing the associated quarterly non-GAAP measures, without further tax adjustments.

Non-GAAP Measures

The specific non-GAAP measures included herein are gross profit, gross margin, net income, net margin, and EPS. The Company calculates these measures as follows:

--Gross Profit. K&S non-GAAP gross profit excludes the effects of equity-based compensation expense recorded within cost of sales.

--Gross Margin. K&S non-GAAP gross margin excludes the impact of equity-based compensation expense recorded within cost of sales.

--Net Income (loss) and Earnings per Share. K&S non-GAAP net income (loss) and EPS exclude equity-based compensation expenses, amortization of intangibles, U.S pension plan termination charge, gains on debt extinguishment, and related tax effects.

--Net Margin. Non-GAAP net margin reflects the Company's net margin excluding equity-based compensation, amortization of intangibles, U.S pension plan termination charge, gains on debt extinguishment, and related tax effects.

About Kulicke & Soffa

Kulicke & Soffa (NASDAQ: KLIC) is a global leader in the design and manufacture of semiconductor assembly equipment. As one of the pioneers of the industry, K&S has provided customers with market leading packaging solutions for decades. In recent years K&S has expanded its product offerings through strategic acquisitions, adding die bonding, wedge bonding and a broader range of expendable tools to its core wire bonding products. Combined with its extensive expertise in process technology, K&S is well positioned to help customers meet the challenges of assembling the next-generation semiconductor devices. ( 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 global economic conditions, future demand for our products, visibility regarding future demand for our products, future costs and savings associated with headcount and other reductions, our future revenue, sales, profitability, financial results, strength of our balance sheet, and product development. 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 of failure to successfully integrate Orthodyne; 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; instability in capital and credit markets; and the factors listed or discussed in Kulicke and Soffa Industries, Inc. 2007 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 STATEMENTS OF OPERATIONS

(In thousands, except per share and employee data)

(Unaudited)

Three months ended

Fiscal year ended

September 29,

September 27,

September 29,

September 27,

2007

2008

2007

2008

Net revenue

$

151,600

$

61,230

$

370,526

$

328,050

Cost of sales 

90,543

36,364

215,090

194,257

Gross profit 

61,057

24,866

155,436

133,793

Selling, general and administrative

22,568

22,304

88,839

89,356

Research and development

13,016

14,683

49,085

59,917

U.S. pension plan termination

-

-

-

9,152

Total operating expenses

35,584

36,987

137,924

158,425

Income (loss) from operations

25,473

(12,121

)

17,512

(24,632

)

Interest income

2,073

1,004

6,866

4,732

Interest expense

(924

)

(892

)

(2,876 

)

(3,499

)

Gain on extinguishment of debt

2,802

-

2,802

170

Income (loss) from continuing operations

29,424

(12,009

)

24,304

(23,229

)

before income taxes

Provision (benefit) for income taxes

4,064

(992

)

5,448

(3,610

)

Income (loss) from continuing operations

25,360

(11,017

)

18,856

(19,619

)

Income from discontinued operations, net of tax

4,891

6,408

18,874

23,441

Net income (loss)

$

30,251

$

(4,609

)

$

37,730

$

3,822

Income (loss) per share from continuing operations:

Basic

$

0.47

$

(0.21

)

$

0.34

$

(0.37

)

Diluted

$

0.40

$

(0.21

)

$

0.29

$

(0.37

)

Income from share of discontinued operations:

Basic

$

0.09

$

0.12

$

0.33

$

0.44

Diluted

$

0.07

$

0.12

$

0.28

$

0.44

Net income (loss) per share:

Basic

$

0.56

$

(0.09

)

$

0.67

$

0.07

Diluted

$

0.47

$

(0.09

)

$

0.57

$

0.07

Weighted average shares outstanding:

Basic

53,546

53,621

56,221

53,449

Diluted

64,702

53,621

68,274

53,449

Stock-based compensation expense included in continuing operations:

Cost of sales

$

45

$

65

$

236

$

252

Selling, general and administrative

722

513

4,038

3,711

Research and development

330

192

1,576

1,442

Total

$

1,097

$

770

$

5,850

$

5,405

Three months ended

Fiscal year ended

September 29,

September 27,

September 29,

September 27,

Additional financial data:

2007

2008

2007

2008

Depreciation and amortization

Continuing operations

$

2,941

$

2,336

$

9,559

$

9,080

Discontinued operations

$

530

$

241

$

1,352

$

968

Capital expenditures

Continuing operations

$

1,994

$

1,544

$

5,575

$

7,850

Discontinued operations

$

32

$

32

$

188

$

151

September 29,

September 27,

2007

2008

Backlog of orders

Continuing operations

$

86,000

$

50,000

Discontinued operations

$

19,000

$

22,000

Number of employees

Continuing operations

2,649

2,496

Discontinued operations

254

293

Note -

Statements of operations and additional financial data reflect accounting for the sale of the company's Wire business as a discontinued operation in accordance with the requirements of FAS 144.

KULICKE & SOFFA INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

September 29,

September 27, 

2007

2008

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

150,571

$

144,932

Restricted cash

-

35,000

Short-term investments

19,339

4,148

Accounts and notes receivable, net of allowance for doubtful accounts of $1,586 and $1,376, respectively

116,693

56,643

Inventories, net

37,838

27,236

Prepaid expenses and other current assets 

12,023

18,729 

Deferred income taxes

3,540

2,118

Current assets of discontinued operations

94,205

127,958

TOTAL CURRENT ASSETS

434,209

416,764

Property, plant and equipment, net

34,108

36,900

Intangible assets

500

386

Goodwill

3,528

2,709

Investments available for sale

-

2,001

Other assets

6,573

5,468

Non-current assets of discontinued operations

33,682

32,909

TOTAL ASSETS

$

512,600 

$

497,137

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Current portion of long term debt

$

-

$

72,412

Accounts payable

62,870

25,028

Accrued expenses

34,714

27,255

Income taxes payable

22,665

569

Current liabilities of discontinued operations

22,201

34,411

TOTAL CURRENT LIABILITIES 

142,450

159,675

Long term debt

251,412

175,000

Other liabilities

12,149

37,780

Deferred income taxes

22,525

21,591

Other liabilities of discontinued operations

809

624

TOTAL LIABILITIES

429,345

394,670

SHAREHOLDERS' EQUITY

Common stock, no par value

288,714

295,841

Treasury stock, at cost

(46,118

)

(46,118

)

Accumulated deficit

(154,094

)

(149,465

)

Accumulated other comprehensive income (loss)

(5,247

)

2,209

TOTAL SHAREHOLDERS' EQUITY

83,255

102,467

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

512,600

$

497,137

KULICKE & SOFFA INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three months ended

Fiscal year ended

September 29, 2007

September 27, 2008

September 29, 2007

September 27, 2008

Net cash provided by (used in) continuing operations

$

18,936

$

1,999

$

(2,017

)

$

26,936

Net cash provided by discontinued operations