Weak Demand Stings Kulicke & Soffa

Revenue from equipment and packaging materials segments plummet.
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Kulicke & Soffa's

(KLIC) - Get Report

Q4 FY08 revenue plunged 59.6% to $61.23 million from $151.60 million in the prior year's quarter due to weaker demand in the sluggish economy and lower revenue from the Equipment segment.

Looking at the company's business segments, revenue from the Equipment segment plummeted 65.6% to $46.96 million from $136.65 million, while revenue from the Packaging Materials segment dipped 4.6% to $14.27 million from $14.96 million. Geographically, about 29.0% revenue came from China, 24.0% from Taiwan and 10.0% from Americas.

During the quarter, gross profit margin widened 1,070 basis points to 40.78% from 30.08% a year ago owing a to 59.8% decline in cost of sales. Cost of sales decreased to $36.36 million from $90.54 million. Selling, general and administrative expenses decreased marginally to $22.30 million from $22.57 million, while research and development expenses increased 12.8% to $14.68 million from $13.02 million. Operating margin stood at a negative 4.72% compared to a positive 12.67% a year ago. Interest expense dipped 3.3% to $890,000 from $920,000. Moreover, interest coverage ratio stood at a negative 17.35 compared to a positive 32.45. Finally, the company swung to a net loss of $4.61 million or $0.21 per share compared to a net profit of $30.25 million or $0.47 per share in the prior year's quarter hurt by lower revenue. On a non-GAAP, loss was $10.30 million or $0.19 per share.

Kulicke and Soffa's cash and cash equivalents grew 9.5% to $186.08 million from $169.91 million, whereas net operating cash flow decreased 82.2% to $5.02 million. However, a quick ratio of 1.52 reflects the company's strong ability to cover any short-term cash needs. Return on assets shrunk 659 basis points to 0.77% from 7.36%. Similarly, return on equity worsened to a negative 19.15% compared to a positive 45.32% in the prior year's quarter. Total debt for the quarter declined 1.6% to $247.41 million from $251.41 million. Stockholders' equity spiked 23.1% to $102.47 million from $83.26 million. Therefore, the debt-to-equity ratio improved to 2.41 from 3.02 on a year-over-year basis.

During the quarter under review, the company completed the acquisition of

Orthodyne Electronics Corp.

(Orthodyne), the supplier of wedge bonders and wedges for the power management and hybrid module markets for 7.10 million shares and $80.00 million in cash. The company also completed the sale of its wire business unit to

W.C. Heraeus GmbH

(Heraeus), a precious metals and technology group for around $165.00 million, including estimated working capital adjustments.

For FY08, net revenue declined 11.5% to $328.05 million from $370.53 million. Net profit for the year plummeted 89.9% to $3.82 million or $0.07 per share from $37.73 million or $0.57 per share in FY07. On a non-GAAP basis, the company incurred a loss of $8.35 million or $0.16 per share compared to a net profit of $17.09 million or $0.27 per share.

Looking forward to Q1 FY09, Kulicke and Soffa Industries Inc. expects net revenue of approximately $40.00 million, including Orthodyne. Moreover, as part of the restructuring strategy, the company plans to reduce 240 positions and cancel annual salary increases for January 2009.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider KLIC to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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