科磊 (KLAC) 2002 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the ICOS Vision Systems fourth quarter 2002 conference call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touch-tone phone. As a reminder, this conference call is being recorded. I would now like to turn the program to Ms. Jodie Burfening (ph) of Lippert/Heilshorn (ph). You may given the conference

Welcome to ICOS Vision Systems fourth quarter and fiscal year end 2002 earnings conference call. With us today is Anton DeProft, president and CEO. You should have all received a copy of the press release which was issued earlier today. If you have not received the release, a copy has been posted to the investor relations section of the company's web site at www.icos.be.

Before starting the call I would like to mention that certain statements made by management during the course of the conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These involve known and unknown risks and uncertainties and other factors which may cause the actual results, performance or achievements of ICOS to be materially different from any future results, performance or achieve achievements implied or expressed by such forward-looking statements. Such factors include among others those detailed in the company's reports filed with the Securities & Exchange Commission. With that I will turn the call over to Anton. Anton?

Yes. Thank you very much, Jodie. Hello, everyone. Welcome to our ford tort fourth quarter and fiscal year 2002 conference call. I will discuss our performance during the fourth quarter and the entire year 2002. Then I will comment on the outlook of our business. After that I will be glad to take your questions followed by some closing remarks.

To start, let me remind you that from this quarter on ICOS will report its financial statements in Euro. For your reference historical quarterly financial statements for the years 2002 and 2001in Euros can be found in the investor relations sections on the company web site www.icos.be.

Revenues for the three months ended December 31, 2002 were 8.7 million Euro representing a slight increase over the third quarter 8.6 million Euro and more than doubling compared to the 3.7 million Euro reported for the fourth quarter of 2001.

Income from operations for the fourth quarter of 2002 was 430,000 Euro compared to an operating loss of 1.9 million Euro for the fourth quarter of 2001. The net loss of the fourth quarter of 2002 was 930,000 Euro or nine Euro cents per share. This compares to a net loss of 1.2 million Euro or 12 Euro cents per share for the fourth quarter a year earlier.

For the fiscal year ending December 31, 2002, we are reporting revenue of 30.6 million Euro, an increase of approximately 15 percent compared to the revenue of 26.5 million Euro over the year 2001. In dollar terms this amounts to an increase of about 22 percent. The operating loss for the entire year 2002 was 325,000 Euro, a considerable improvement over the 13.7 million Euro operating loss ICOS reported for the year 2001.

The net loss for the year 2002 decreased to 2.4 million Euro from a net loss of 8.7 million Euro for 2001. We are pleased that we can present the third consecutive quarter with an operational profit illustrating that our cost structure is now in line with the current market conditions. In addition, thanks to an increasing market share for our main product line, we have now increased our revenues for five consecutive quarters, albeit modestly in the last quarter.

First time buyers accounted for 20 percent of revenue for the fourth quarter of 2002. These customers were located in South Korea, Malaysia, the United States and mainland China. They were customers for both OEM products as well as for inspection machines. For the fiscal year 2002 new customers accounted for 15 percent of revenue.

We have added several large new customers to our portfolio and we are very proud to say that we are now selling our inspection equipment to all large integrated device managers and subcontractors alike. During the second half of the year the new customers added considerably to the revenues as we generated more than 20 percent of our sales to new customers. This has allowed us to increase our market sales in a decreasing market and made us the market leader in our most important market, that of the trade based inspection systems.

The new products, throughout the downturn we kept our ability to develop new leading edge products intact as we see this as the basis for our future success. First a substantial amount of R&D effort during the quarter was spent on our tray () based inspection systems. As we are gaining new customers for these products they constantly are being qualified by those new customers each with their own inspection requirements and requests and sometimes even with special package formats. This has created a large amount of development requests, but each with concrete business at the other side of the development.

Secondly, a substantial R&D effort during the quarter was spent on the further finalization of the CI-G10. The CI-G10 system is a gravity based inspection system for the inspection of tube based components and opens a new market segment to ICOS. And finally, major R&D work was spent on the continuous improvement of various products and on the development of technologies for future generation inspection equipment. The intensive R&D work during the last few months result resulted in new products sales accounting for 16 percent of revenues in the fourth quarter of 2002.

The competitive situation, we believe we have continued to strengthen our market leadership position for tray based component inspection systems. After the introduction of our latest generation of equipment, our main competitor has announced it is selling its division which is competing with ICOS. Following this announcement of our competitor, more customers have started to qualify our inspection system for various applications. Even though we don't see another strong competitor emerging today we do see some other companies trying to enter in this market. We can not exclude that some of them will become successful.

The organization, our total number of employees stood at 150 full-time equivalents at the end of the fiscal year 2002, down from a level of 152 full-time equivalents at the end of the fiscal year 2001. Despite the continuous increase of our revenue revenues every other over the past five quarters, ICOS continued to monitor closely all of its expenditures including hiring of new employees.

During the fourth quarter of 2002, we also strengthened our commercial network. We appointed a new distributor in mainland China and we opened the liaison office in Shanghai in close cooperation with a local distributor. More recently, we also signed a distribution agreement with a new distributor who has a very strong local network throughout Southeast Asia to further support our business opportunities in this entire area. During the year 2002 we concentrated our efforts on streamlining and strengthening the organization after the restructuring efforts of 2001.

The revenue breakdown per product line for the fourth quarter, the revenue breakdowns was 19 percent board level, 13 percent system level and 68 percent inspection machines. This compares to 13 percent, 21 percent and 66 percent for the third quarter. The inspection machines continued to be our largest product line, followed by the board level OEM products which continued to strengthen.

The revenue breakdown for geographic area, during the fourth quarter of this year the major sales volume was again realized in Asia where we did 16 percent of our turnover in Japan and 47 percent in other countries of Asia. 30 percent of our turnover was realized in Europe and 7 percent in the U.S. The strong sales in Asia were mainly fueled by our increasing sales level in mainland China as we predicted during our previous conference call.

Let's now turn to the financial information. On revenues of 8.7 million Euro we achieved a gross margin of 57.4 percent in the fourth quarter, compared to gross margin of 57 percent flat in the third quarter of 2002. Our gross margin for the fiscal year 2002 ended at 60 percent, which was mainly positively impacted by the re-evaluation of previously depreciated inventory during the second quarter. Excluding this impact our gross margin for the entire year would have been approximately 56 percent.

As we mentioned last time, we also believe that in the near if you future we will be able to keep the gross margins roughly at the 55 to 57 percent level. R&D expenses were 1.6 million Euro for the quarter compared to 1.9 million Euro in the previous quarter. During the quarter we were able to record the first portion of the government grant of 220,000 Euro from a previously announced total grant of 1.1 million. We believe that the R&D expenses reported during the fourth quarter are a good guidance for the current quarter.

SG&A expenses remain flat at 2.9 million Euro compared to the previous quarter. Again we believe that the reported cost level is a good indication for expected costs in the current quarter, with the understanding, of course, that the SG&A costs contain sales commissions which depend on the overall sales level and the product and area mix. The income from operations for the fourth quarter was 427,000 Euro, a significant improvement over the 1.8 million Euro operating loss we reported for the fourth quarter of 2001. But also on a sequential basis this operating income was four times higher than that of the third quarter.

We recorded a net loss for the fourth quarter of 2002 of 926,000 Euro compared to a net loss of 1.2 million in the fourth quarter of 2001. As announced in our previous conference call, our fourth quarter net result was negatively impacted by a one-time non-cash income tax expense of approximately 700,000 Euro, following the decrease of our tax assets as a consequence of the lower corporate tax rate which became effect in Belgium. Obviously, we considered this good news as it means we will effectively pay less taxes in the future.

Also we incurred a foreign exchange loss in the quarter of 750,000 Euro, due to the weakening of the U.S. dollar versus the Euro. Also here the major portion of this amount is internal to the company. Cash flow from operations in the quarter was negative 220,000 Euro. Net cash provided by operating activity including changes in working capital was positive 670,000 Euro. Also for the full year our net cash provided by operations was positive 1.4 million Euro.

During the entire year 2002 we used 2 million Euro in the finalization of the construction works for our new headquarters in Belgium. Where financing activity generated 5.9 million Euro from the proceeds of borrowings.

We now turn to the balance sheet. Cash balance stood at 25.9 million Euro at the end of the year 2002, an improvement over the 20.7 million Euro of fiscal year 2001. This change in cash position is mainly caused by the above mentioned cash provided by operating activities and net financing and investment activities of approximately 4 million Euro. We believe that our current cash level is more than adequate for future operations.

Accounts receivable increased to 7.6 million Euro from 3.5 million Euro at the ends of 2001 as a result of the increased sales volumes. Days outstanding were 79 days in the fourth quarter of 2002, decreasing from 86 days one year earlier. Inventories have decreased continuously during the year to end at 11.7 million Euro at the end of 2002, compared to an inventory level of 17 million Euro at the end of 2001. The inventory split was 5.3 million Euro raw materials, 4.9 million Euro work in progress and 1.5 million finished goods.

Before moving to the business outlook, I would like to briefly look back at 2002. First of all, it was a year in which the market did not recover. Due to the over capacity that still existed in the market, the semiconductor capital market still shrunk with 25 to 30 percent. In this environment ICOS regained its financial stability with an operational profit during the last nine months and a positive net cash generated from the operations for the whole year.

At the same time ICOS kept a clear strategy in dealing with the severe downturn in the market, concentrating on two priorities - technological leadership and customer support. Key R&D projects were preserved and even some additional initiatives were started. During the year we strengthened our technology base. We acquired new technology and we opened the mechanical design center in Hong Kong. Also our customer support network was kept intact and even strengthened.

We now have a very strong commercial network of ICOS offices and top quality representatives that work in close conjunction together to provide our worldwide customers with world class support. It is this clear strategy of concentrating on R&D and customer support that has led to the substantial increase in market share during the year. We are now selling our inspection equipment to all major integrated device managers and subcontractors alike and have become the dominant market leader in the tray based component inspection market. This strategy allowed us to expand our addressable market by the introduction of new equipment.

So to summarize even further, in 2002 ICOS managed to regain its financial stability in what was still a depressed year for the industry and planted a lot of seeds for the future with a larger customer base and a larger addressable market to grow from. From what I have just said, I think it is fair to conclude that ICOS is confident for the future. Once the capital spending cycle resumes we believe we will see healthy levels of growth and profit again. However, the timing of the semiconductor market is very difficult to predict. While we see some encouraging signs and while our visibility is improving somewhat, we continue to see as we reported last time some conflicting and rapidly changing input. Especially short-term spending patterns remain difficult to predict in light of the ongoing global economic weakness and political instability.

Therefore, we expect revenues in the first quarter will remain flat relative to the fourth quarter. At this level of revenue we also expect to remain profitable on an operating income basis and excluding any foreign currency exchange loss to generate a net profit.

To conclude, I would like to make a couple comments of a somewhat different nature. First, the board of directors has decided to ask approval from the general assembly of shareholders to purchase up to 1 million shares of the company back at any price below 10 Euro. Secondly, I also want to remind you that the company will apply for a listing on the first market of Euronext Brussels. Currently the company trades on both NASDAQ and NASDAQ Europe. It plans also to request de-listing from NASDAQ Europe after the shares are listed on Euronext. Depending on the time it takes to complete the approval process, the company expects to trade on Euro next in the next quarter. That concludes my comments. I would like to open the call to questions. Operator?

Thank you, sir. Ladies and gentlemen if you have a question at this time, please press the one key on your touch-tone phone. If your question has been answered or you wish to remove yourself from the queue, press the pounds key. Once again, if you have a question, press the one key. One moment for our first question. Once again, ladies and gentlemen, if you have a question, please press the one key. Mr. DeProft, there appear to be no questions at this time

All right. So, no questions? Then I think I just would like to conclude by saying that we have a very strong balance sheet. Our operations are generating net cash again and we have substantially grown our customer base and we have increased our addressable market. Therefore, we believe we will emerge a lot strong stronger from the current downturn. Thank you. Thank you for joining us today. We look forward to speaking with you again next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.