FEI Company Reports Operating Results (10-K)
Fei Company has a market cap of $1.67 billion; its shares were traded at around $44.72 with a P/E ratio of 18.3 and P/S ratio of 2.
Highlight of Business Operations:Net sales increased $192.2 million, or 30.3%, to $826.4 million in 2011 compared to $634.2 million in 2010 and increased $56.9 million, or 9.9%, in 2010 compared to $577.3 million in 2009. The factors affecting net sales are discussed in more detail in the Net Sales by Segment discussion below.
Cost of sales increased $94.1 million, or 25.8%, to $459.1 million in 2011 compared to $365.0 million in 2010, primarily due to increased sales. The impact of currency fluctuations on cost of sales was an increase of $6.0 million in 2011 compared to 2010. The net effect on our gross margin from currency fluctuations during 2011 compared to 2010 was an increase of $16.4 million, or 0.8 percentage points.
Cost of sales increased $17.2 million, or 4.9%, to $365.0 million in 2010 compared to $347.8 million in 2009 primarily due to increased sales. Currency fluctuations decreased cost of sales by $13.2 million in 2010 compared to 2009. Gross margins were positively affected in 2010 due to purchasing and operational improvements, a lower level of competitive pricing pressure in 2010 and improved product mix with increased Electronics segment sales and increased high-end TEM and small DualBeam systems being sold. The net effect on our gross margin from currency fluctuations during 2010 was an approximately $6.6 million, or a 1.5 percentage point, increase.
SG&A costs increased in 2011 compared to 2010 primarily due to increased commissions driven by the increase in revenue and increased employee incentive compensation, as well as an impairment charge of $1.4 million to write off the unamortized value of intellectual property and a $5.3 million charge for contingent litigation accruals. This activity was partially offset by a decrease in bad debt write-offs. In the first quarter of 2010, we recorded a $2.1 million charge to fully write off amounts receivable from one customer. Currency fluctuations increased SG&A costs by $3.9 million in 2011 compared to 2010.
The allowance for doubtful accounts is estimated based on collection experience and known trends with current customers. The large number of entities comprising our customer base and their dispersion across many different industries and geographies somewhat mitigates our credit risk exposure and the magnitude of our allowance for doubtful accounts. Our estimates of the allowance for doubtful accounts are reviewed and updated on a quarterly basis. Changes to the reserve may occur based upon changes in revenue levels and associated balances in accounts receivable and estimated changes in individual customers credit quality. Write-offs include amounts written off for specifically identified bad debts. Historically, we have not incurred significant write-offs of accounts receivable, however, an individual loss could be significant due to the relative size of our sales transactions. Our bad debt expense totaled zero, $2.5 million and $0.6 million, respectively, in 2011, 2010 and 2009. Our allowance for doubtful accounts totaled $5.6 million and $5.7 million, respectively, at December 31, 2011 and 2010.
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