Kulicke & Soffa (KLIC) Reports Results for its First Fiscal Quarter 2010

FORT WASHINGTON, Pa.–(BUSINESS WIRE)–Kulicke & Soffa Industries, Inc. (NASDAQ:KLIC – News) (“K&S”) today announced results for its first fiscal quarter ended January 2, 2010. For its first quarter, the Company reported net revenue of $128.4 million and net income of $15.8 million, or $0.21 per diluted share. This press release contains both GAAP results and non-GAAP measures.

On a non-GAAP basis* for the first quarter of fiscal 2010, the Company reported net revenue of $128.4 million and net income of $21.2 million, or $0.29 per diluted share.

Quarterly GAAP Results
From Continuing Operations		Q1 2010		**Change vs. Q1 2009		**Change vs. Q4 2009
Net Revenue		$128.4 million		243%		16%
Gross Profit		$56.4 million		305%		19%
Gross Margin		43.9%		667 basis points		119 basis points
Net Income		$15.8 million		181%		174%
Net Margin		12.3%		6,469 basis points		711 basis points
EPS – Diluted		$0.21		166%		163%

Quarterly Non-GAAP Measures*
From Continuing Operations		Q1 2010		**Change vs. Q1 2009		**Change vs. Q4 2009
Net Revenue		$128.4 million		243%		16%
Gross Profit		$56.4 million		306%		19%
Gross Margin		43.9%		679 basis points		120 basis points
Net Income		$21.2 million		197%		96%
Net Margin		16.5%		7,498 basis points		673 basis points
EPS – Diluted		$0.29		179%		84%

*Non-GAAP measures exclude: equity-based compensation; severance; facilities contractual commitments; tax settlement expense; amortization of intangibles; gain on extinguishment of debt; non-cash interest expense; tax settlement benefit; and related tax effects on non-GAAP adjustments (see reconciliations of GAAP results to Non-GAAP measures in the following financial schedules).

** As adjusted for ASC No. 470.20, Debt, Debt With Conversion Options.

Commenting on the results, Scott Kulicke, Chairman and Chief Executive Officer, said, “Results for our December quarter reflect the continuing strong semiconductor industry recovery, as well as our own efforts to expand our revenue base. Besides ball bonder demand driven by semiconductor unit volume growth, our revenue includes demand from the LED market and from the industry’s transition to copper wire bonding. In addition, we are seeing accelerating demand for our heavy wire wedge bonders. We expect these trends to continue through the March quarter, resulting in March quarter revenue in the range of $140 to $150 million.”

Key Product Trends

• Ball bonder unit volumes increased approximately 23% over the September quarter levels
  • Conversion to copper wire bonding continues to accelerate; total copper kit volumes increased 146% over the September quarter to approximately 1,550
  • Continued strong demand for ball bonders from the LED market
• Heavy wire wedge bonder demand accelerated late in the quarter and is expected to be strong at least through the March quarter
• First purchase order received for iStack_PS^TM die bonder in January 2010

Financial Highlights

• Gross Margin improved 119 basis points to 43.9%
• Return on Invested Capital^† of 35.4%
• Total cash and cash equivalents of $175.2 million as of January 2, 2010
• Net revenue for the March quarter of fiscal 2010 is expected to be $140 to $150 million

^†See Reconciliation of Return on Invested Capital table.

Earnings Conference Call Details

A conference call to discuss these results will be held today, February 4, 2010 beginning at 9:00 am (ET). To access the conference call, interested parties may call (877) 407-8037 or 201-689-8037, or log on to 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 342765 (replay ID number). A replay will also be available on the K&S website at www.kns.com/investors/events. The replay will be available via phone and website for a limited time.

Discussion of Non-GAAP Measures

This press release contains non-GAAP 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 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 measures to be a substitute for, or superior to, financial results presented in accordance with GAAP. All of the non-GAAP 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 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 measures:

– Equity-based compensation expenses. 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 and time-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:

• Severance plan
• Facilities contractual commitments
• Tax settlement expense
• Amortization of intangibles
• Gain on extinguishment of debt
• Non-cash interest expense
• Tax settlement benefit

– 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, adjusted for discrete quarterly items, by the GAAP operating 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 (loss), net margin, and earnings per share (“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 EPS. K&S non-GAAP net income (loss) and EPS exclude equity-based compensation; severance; facilities contractual commitments; tax settlement expense; amortization of intangibles; gain on extinguishment of debt; non-cash interest expense; tax settlement benefit; and related tax effects on non-GAAP adjustments.

—Net Margin. K&S non-GAAP net margin reflects the Company’s net margin excluding equity-based compensation; severance; facilities contractual commitments; tax settlement expense; amortization of intangibles; gain on extinguishment of debt; non-cash interest expense; tax settlement benefit; and related tax effects on non-GAAP adjustments.

About Kulicke & Soffa

Kulicke & Soffa (NASDAQ: KLIC – News) 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 ball 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 increasing demand for ball bonders, the continuing semiconductor industry recovery, increasing demand for ball bonder products from the conversion to copper wire bonding and penetration of the LED market, continuing, accelerating demand for heavy wire wedge bonding products, future revenue, sales, demand for our products 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: difficult global economic conditions, which could result in, among other things, sharply lower demand for products containing semiconductors and for the Company’s products, and disruption of capital and credit markets; the risk of failure to successfully manage our operations; the risk of failure to successfully integrate Orthodyne; the risk that anticipated customer 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; 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; and the factors listed or discussed in Kulicke and Soffa Industries, Inc. 2009 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
		December 27,				January 2,
		2008 *				2010
Net revenue		$	37,416			$	128,415
Cost of sales			23,488				72,042
Gross profit			13,928				56,373
Selling, general and administrative			29,852				25,226
Research and development			15,400				13,161
Total operating expenses			45,252				38,387
Income (loss) from operations			(31,324	)			17,986
Interest income			754				97
Interest expense			(2,079	)			(2,083	)
Gain on extinguishment of debt			1,179				–
Income (loss) from continuing operations, before tax			(31,470	)			16,000
Provision (benefit) for income taxes			(11,882	)			160
Income (loss) from continuing operations			(19,588	)			15,840
Income from discontinued operations, net of tax			22,727				–
Net income		$	3,139			$	15,840
Income (loss) per share from continuing operations:
Basic		$	(0.32	)		$	0.23
Diluted		$	(0.32	)		$	0.21
Income per share from discontinued operations:
Basic		$	0.37			$	–
Diluted		$	0.37			$	–
Net income per share:
Basic		$	0.05			$	0.23
Diluted		$	0.05			$	0.21
Weighted average shares outstanding:
Basic			60,451				69,684
Diluted			60,451				73,687
Equity-based compensation expense included in continuing operations:
Cost of sales		$	(29	)		$	46
Selling, general and administrative			(667	)			714
Research and development			24				344
Total		$	(672	)		$	1,104
		Three months ended
		December 27,				January 2,
Additional financial data:		2008 *				2010
Depreciation and amortization
Continuing operations		$	5,559			$	4,513
Capital expenditures
Continuing operations		$	2,433			$	1,096
		December 27,				January 2,
		2008 *				2010
Backlog of orders
Continuing operations		$	53,000			$	36,000
Number of employees
Continuing operations			2,434				2,574
* As adjusted for ASC No. 470.20, Debt, Debt With Conversion Options.

KULICKE & SOFFA INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
						(Unaudited)
		October 3,				January 2,
		2009 *				2010
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	144,560			$	175,207
Restricted cash			281				216
Accounts and notes receivable, net of allowance for doubtful accounts of $1,378 and $1,009 respectively			95,779				84,370
Inventories, net			41,489				49,784
Prepaid expenses and other current assets			11,566				13,475
Deferred income taxes			1,786				1,789
TOTAL CURRENT ASSETS			295,461				324,841
Property, plant and equipment, net			36,046				35,054
Goodwill			26,698				26,698
Intangible assets			48,656				46,270
Other assets			5,774				7,369
TOTAL ASSETS		$	412,635			$	440,232
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Current portion of long term debt		$	48,964			$	48,964
Accounts payable			39,908				53,245
Accrued expenses and other current liabilities			32,576				29,480
Income taxes payable			1,612				1,341
TOTAL CURRENT LIABILITIES			123,060				133,030
Long term debt			92,217				93,733
Deferred income taxes			16,282				16,329
Other liabilities			10,273				9,742
TOTAL LIABILITIES			241,832				252,834
SHAREHOLDERS’ EQUITY
Common stock, no par value			413,092				414,462
Treasury stock, at cost			(46,356	)			(46,356	)
Accumulated deficit			(197,812	)			(181,972	)
Accumulated other comprehensive income			1,879				1,264
TOTAL SHAREHOLDERS’ EQUITY			170,803				187,398
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY		$	412,635			$	440,232
* As adjusted for ASC No. 470.20, Debt, Debt With Conversion Options.

KULICKE & SOFFA INDUSTRIES, INC.
OPERATING RESULTS BY BUSINESS SEGMENT
(In thousands)
(Unaudited)
Fiscal 2010:
						Expendable
		Equipment				Tools
Three months ended January 2, 2010		Segment				Segment			Consolidated
Net revenue		$	111,597			$	16,818		$	128,415
Cost of sales			65,145				6,897			72,042
Gross profit			46,452				9,921			56,373
Operating expenses			31,605				6,782			38,387
Income from continuing operations		$	14,847			$	3,139		$	17,986
Fiscal 2009:
						Expendable
		Equipment				Tools
Three months ended December 27, 2008 *		Segment				Segment			Consolidated
Net revenue		$	23,659			$	13,757		$	37,416
Cost of sales			16,657				6,831			23,488
Gross profit			7,002				6,926			13,928
Operating expenses			38,733				6,519			45,252
Income (loss) from continuing operations		$	(31,731	)		$	407		$	(31,324	)
* As adjusted for ASC No. 470.20, Debt, Debt With Conversion Options.

KULICKE & SOFFA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		Three months ended
		December 27, 2008				January 2, 2010
Net cash provided by continuing operations		$	2,012			$	34,125
Net cash used in discontinued operations			(779	)			(496	)
Net cash provided by operating activities		$	1,233			$	33,629
Net cash used in investing activities, continuing operations			(48,880	)			(1,031	)
Net cash provided by (used in) investing activities, discontinued operations			149,857				(1,838	)
Net cash provided by (used in) investing activities		$	100,977			$	(2,869	)
Net cash used in financing activities, continuing operations			(74,187	)			(23	)
Effect of exchange rate changes on cash and cash equivalents			91				(90	)
Changes in cash and cash equivalents		$	28,114			$	30,647
Cash and cash equivalents, beginning of period			144,932				144,560
Cash and cash equivalents, end of period		$	173,046			$	175,207

KULICKE & SOFFA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS – SUMMARY
COMPARISON OF GAAP RESULTS TO NON-GAAP MEASURES
(In thousands, except share amounts)
(Unaudited)
		Three months ended				Three months ended
		December 27,				January 2,
		2008 *				2010
		(GAAP results)
Net revenue		$	37,416			$	128,415
Gross profit			13,928				56,373
Income (loss) from operations			(31,324	)			17,986
Income (loss) from continuing operations			(19,588	)			15,840
Weighted average shares outstanding
Basic			60,451				69,684
Diluted			60,451				73,687
Income (loss) per share from continuing operations
Basic		$	(0.32	)		$	0.23
Diluted		$	(0.32	)		$	0.21
		(Non-GAAP measures)
Net revenue		$	37,416			$	128,415
Gross profit			13,899				56,419
Income (loss) from operations			(21,837	)			21,677
Income (loss) from continuing operations			(21,878	)			21,197
Weighted average shares outstanding
Basic			60,451				69,684
Diluted			60,451				73,687
Income (loss) per share from continuing operations
Basic		$	(0.36	)		$	0.30
Diluted		$	(0.36	)		$	0.29
* As adjusted for ASC No. 470.20, Debt, Debt With Conversion Options.

KULICKE & SOFFA INDUSTRIES, INC.
OPERATING RESULTS BY BUSINESS SEGMENT – SUMMARY
COMPARISON OF GAAP RESULTS TO NON-GAAP MEASURES
(In thousands)
(Unaudited)
						Expendable
		Equipment				Tools
		Segment				Segment			Consolidated
Fiscal 2010:
Three months ended January 2, 2010
		(GAAP results)
Net revenue		$	111,597			$	16,818		$	128,415
Gross profit			46,452				9,921			56,373
Income from operations			14,847				3,139			17,986
		(Non-GAAP measures)
Net revenue		$	111,597			$	16,818		$	128,415
Gross profit			46,489				9,930			56,419
Income from operations			17,513				4,164			21,677
Fiscal 2009:
Three months ended December 27, 2008 *
		(GAAP results)
Net revenue		$	23,659			$	13,757		$	37,416
Gross profit			7,002				6,926			13,928
Income (loss) from operations			(31,731	)			407			(31,324	)
		(Non-GAAP measures)
Net revenue		$	23,659			$	13,757		$	37,416
Gross profit			7,017				6,882			13,899
Income (loss) from operations			(26,237	)			4,400			(21,837	)

KULICKE & SOFFA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF GAAP RESULTS TO NON-GAAP MEASURES
(In thousands, except share amounts)
(Unaudited)
		Three months ended						Three months ended
		December 27,				% of		January 2,				% of
		2008 *				Revenue		2010				Revenue
Net revenue (GAAP results)		$	37,416					$	128,415
Net revenue (Non-GAAP measures)			37,416						128,415
Gross profit (GAAP results)			13,928			37.2%			56,373			43.9%
– Equity-based compensation expense			(29	)					46
Gross profit (Non-GAAP measures)			13,899			37.1%			56,419			43.9%
Income (loss) from operations (GAAP results)			(31,324	)		-83.7%			17,986			14.0%
– Equity-based compensation expense			(672	)					1,104
– Severance plan			2,586						199
– Facilities contractual commitments			2,608						–
– Tax settlement expense			2,212						–
– Amortization of intangibles			2,753						2,388
Income (loss) from operations (Non-GAAP measures)			(21,837	)		-58.4%			21,677			16.9%
Income (loss) from continuing operations (GAAP results)			(19,588	)		-52.4%			15,840			12.3%
– Equity-based compensation expense			(672	)					1,104
– Severance plan			2,586						199
– Facilities contractual commitments			2,608						–
– Tax settlement expense			2,212						–
– Amortization of intangibles			2,753						2,388
– Gain on extinguishment of debt			(1,179	)					–
– Non cash interest expense			1,642						1,720
– Tax settlement benefit			(12,154	)					–
– Tax effect of non-GAAP adjustments			(86	)					(54	)
Income (loss) from continuing operations (Non-GAAP measures)			(21,878	)		-58.5%			21,197			16.5%
Weighted average shares outstanding (GAAP & Non-GAAP)
Basic			60,451						69,684
Diluted			60,451						73,687
Income (loss) per share from continuing operations (GAAP results)
Basic		$	(0.32	)				$	0.23
Diluted		$	(0.32	)				$	0.21
Adjustments to net income (loss) per share
Basic		$	(0.04	)				$	0.07
Diluted		$	(0.04	)				$	0.08
Income (loss) per share from continuing operations (Non-GAAP measures)
Basic		$	(0.36	)				$	0.30
Diluted		$	(0.36	)				$	0.29
* As adjusted for ASC No. 470.20, Debt, Debt With Conversion Options.

KULICKE & SOFFA INDUSTRIES, INC.
OPERATING RESULTS BY BUSINESS SEGMENT
RECONCILIATION OF GAAP RESULTS TO NON-GAAP MEASURES
(In thousands)
(Unaudited)
									Expendable
		Equipment				% of			Tools				% of
		Segment				Revenue			Segment				Revenue			Consolidated
Fiscal 2010:
Three months ended January 2, 2010
Net revenue (GAAP results)		$	111,597						$	16,818						$	128,415
Net revenue (Non-GAAP measures)			111,597							16,818							128,415
Gross profit (GAAP results)			46,452			41.6	%			9,921			59.0	%			56,373
– Equity-based compensation expense			37							9							46
Gross profit (Non-GAAP measures)			46,489			41.7	%			9,930			59.0	%			56,419
Income from operations (GAAP results)			14,847			13.3	%			3,139			18.7	%			17,986
– Equity-based compensation expense			877							227							1,104
– Severance plan			(26	)						225							199
– Amortization of intangibles			1,815							573							2,388
Income from operations (Non-GAAP measures)			17,513			15.7	%			4,164			24.8	%			21,677
Fiscal 2009:
Three months ended December 27, 2008
Net revenue (GAAP results)		$	23,659						$	13,757						$	37,416
Net revenue (Non-GAAP measures)			23,659							13,757							37,416
Gross profit (GAAP results)			7,002			29.6	%			6,926			50.3	%			13,928
– Equity-based compensation expense			15							(44	)						(29	)
Gross profit (Non-GAAP measures)			7,017			29.7	%			6,882			50.0	%			13,899
Income (loss) from operations (GAAP results)			(31,731	)		-134.1	%			407			3.0	%			(31,324	)
– Equity-based compensation expense			(367	)						(305	)						(672	)
– Severance plan			1,600							986							2,586
– Facilities contractual commitments			2,165							443							2,608
– Tax settlement expense			–							2,212							2,212
– Amortization of intangibles			2,096							657							2,753
Income (loss) from operations (Non-GAAP measures)			(26,237	)		-110.9	%			4,400			32.0	%			(21,837	)

Reconciliation of Return on Invested Capital
(For the three months ending January 2, 2010)
(Dollar amounts in thousands)
(Unaudited)
		As Reported			Adjustments							Non-GAAP ROIC
		GAAP Results
					Depreciation/
					Amortization
Income from Operations		$	17,986		$	4,513						$	22,499					Adjusted Net
																		Operating Income
													X 4
												$	89,996			(A)		Annualized
					Company				FIN 48
					Cash Limit (1)				Adoption (2)
Cash & Cash
Equivalents & Investments held to Maturity		$	175,423		$	(100,423	)					$	75,000
Non-Cash Assets		$	264,809									$	264,809
Total Assets		$	440,232									$	339,809
Total Current Liabilities		$	133,030						$	1,699		$	85,765
Net Invested Capital		$	307,202									$	254,044			(B)		Adjusted Net
																		Invested Capital
													35.4	%		(A)/(B)		ROIC

(1)		Only the first $75 million of cash is used for the ROIC calculation which management estimates is the Company’s minimum cash requirement.
(2)		Current liabilities includes tax liabilities classified as current liabilities in prior periods, but reclassified to long term liabilities as a result of the Company’s adopted FIN 48 in fiscal Q1 of 2008.