SOURCE: Kulicke & Soffa

July 28, 2005 07:00 ET

Kulicke & Soffa Reports Third Fiscal Quarter Results

WILLOW GROVE, PA -- (MARKET WIRE) -- July 28, 2005 -- Kulicke & Soffa Industries, Inc. (NASDAQ: KLIC) today announced financial results for its third fiscal quarter ended June 30, 2005.

Net revenue for the third fiscal quarter ended June 30, 2005 was $138.2 million compared to $124.8 million for the previous quarter and $194.6 million in the comparable year-ago quarter. The net loss was $101.8 million or $1.97 per share versus net income for the year-ago quarter of $22.7 million or $0.35 per diluted share. Included in the loss for the third fiscal quarter are non-cash goodwill and intangible asset impairment charges of $100.6 million associated with the Company's Test segment and $2.2 million for factory consolidation and relocation. Also included is the recognition of a $1.6 million gain from the previous sale of the Company's wedge bonding technology, and a tax benefit of $1.8 million resulting from the expected repatriation of foreign earnings.

Scott Kulicke, chairman and chief executive officer, stated, "We achieved sequentially increasing equipment revenue for the second and third fiscal quarters and we believe revenue for the fourth fiscal quarter will also increase sequentially. We believe that this pattern of growing demand for our equipment is indicative of the early stages of a semiconductor assembly recovery."

Third Quarter Highlights

Technology & Manufacturing

--  K&S shipped its newest automatic ball bonders, the Maxum Ultra and
    Maxum Elite models, to key customers for evaluation and qualification at
    their sites.  We believe that the first production quantity shipments of
    these new machines will begin during the fourth fiscal quarter.
    
--  The K&S Quatrix test socket was successfully tested at a customer
    location. This new technology replaces traditional spring pins with a
    unique, long-life torsion spring contact that is expected to significantly
    reduce customers' cost of testing.
    
--  K&S completed its plan to migrate the majority of its cantilever probe
    card manufacturing to Asia. In the month of June, China accounted for 59%
    of K&S's cantilever probe card production, while Taiwan accounted for 20%
    and San Jose 21%.
    
Key Product Trends
--  K&S wire bonder sales for the third fiscal quarter were split
    approximately 66% to subcontractors and 34% to IDM's, while the second
    fiscal quarter was split approximately 42% to the subcontractors and 58% to
    IDM's.
    
--  K&S gold bonding wire received record order quantities for a single
    quarter. Orders for the third fiscal quarter totaled more than 1 billion
    feet of bonding wire. The 14% increase in volume over the second fiscal
    quarter represents market share gains at key customers.
    
--  Losses in the Test segment continued to be greater than expected as
    cantilever and package test revenue eroded from the second fiscal quarter.
    The lower revenue was from a change in customer/product mix, which also
    resulted in lower gross margins for the test business segment in the third
    fiscal quarter.
    
Financial Highlights
--  K&S revenue rose 10.8% from the second fiscal quarter to the third
    fiscal quarter, which followed the 7.3% rise from the first fiscal quarter
    to the second fiscal quarter. The increase over the second fiscal quarter
    was a result of stronger demand for our equipment and wire products.
    
--  K&S equipment revenue for the third fiscal quarter was $48.4 million,
    which produced income from operations for the equipment group of $8.5
    million.  This represents a 24% increase in revenue and a 158% increase in
    income from operations over the second fiscal quarter.
    
--  The Company recognized a gain of $1.6 million on the previous sale of
    its wedge bonder technology, which included both the design of wedge
    bonding machines and the licensing of intellectual property.
    
--  Expenses associated with the relocation and restructuring of
    production to low cost regions was $2.2 million during the June quarter,
    which tracked K&S's plan.  The costs associated with these factory moves
    are included in S.G. & A. expenses.
    

Business Summary

Scott Kulicke concluded, "We expect continued incremental revenue growth in the fourth fiscal quarter, which is consistent with our opinion that the semiconductor assembly industry is in a recovery mode. We expect revenue for the September quarter to be in the $160 to $175 million range."

About Kulicke & Soffa

Kulicke & Soffa (NASDAQ: KLIC) is the world's leading supplier of semiconductor wire bonding assembly equipment. We believe K&S is the only major supplier to the semiconductor assembly industry that provides customers with semiconductor wire bonding equipment along with the complementing packaging materials and test interconnect products that actually contact the surface of the customer's semiconductor devices. The ability to control all of these assembly related products is unique to Kulicke & Soffa, and allows us to develop system solutions to the new technology challenges inherent in assembling and packaging next-generation semiconductor devices. Test interconnect products include a variety of wafer probe cards, ATE interface assemblies, and PC boards for wafer testing, as well as test sockets for all types of packaged semiconductor devices. Kulicke & Soffa's web site address is http://www.kns.com.

A conference call to discuss these results will be held today beginning at 9:00 a.m. ET. Interested participants may call 877-407-8037 for the teleconference or log on to http://www.kns.com/investors/events for listen-only mode.

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 our future revenue, shipments, introduction of new products, expected customer benefits from our new products, projected demand for our products, and to the recovery in the semiconductor assembly equipment industry. 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 that anticipated orders may not materialize or that orders received may be postponed or canceled, generally without charges; the risk that anticipated cost savings will not be achieved; 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, particularly in our test business; 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; potential instability in foreign capital markets; and the factors listed or discussed in Kulicke and Soffa Industries, Inc. 2004 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 STATEMENT OF OPERATIONS
        (In thousands, except per share and employee data)
                           (Unaudited)

                                Three months ended      Nine months ended
                                     June 30,               June 30,
                                 2004        2005        2004       2005
                               --------   ---------   --------   ---------

Net revenue                    $194,628   $138,210    $570,268   $ 379,300
Cost of sales                   129,556    105,168     381,300     289,435
                               --------   ---------   --------   ---------
Gross profit                     65,072     33,042     188,968      89,865
                               --------   ---------   --------   ---------

Selling, general and
 administrative                  24,688     24,592      78,055      70,410
Research and development, net     8,887     10,991      25,791      29,792
Resizing (recovery) costs             -          -         (68)          -
Asset impairment                      -     48,820       3,293      48,820
Goodwill impairment                   -     51,756           -      51,756
(Gain) loss on sale of assets         -     (1,563)       (794)     (3,060)
Amortization of
 intangible assets                2,198      1,713       6,828       6,225
                               --------   ---------   --------   ---------

Operating expense                35,773    136,309     113,105     203,943
                               --------   ---------   --------   ---------

Income (loss) from operations    29,299   (103,267)     75,863    (114,078)

Interest income                     275        548         781       1,564
Interest expense                 (2,191)      (953)     (9,052)     (2,846)
Charge on early
 extinguishment of debt          (1,825)         -      (8,594)          -
                               --------   ---------   --------   ---------

Income (loss) from continuing
 operations before income tax    25,558   (103,672)     58,998    (115,360)


Provision for income taxes        2,877     (1,831)      5,637       1,345
                               --------   ---------   --------   ---------

Net income (loss) from
 continuing operations         $ 22,681   $(101,841)  $ 53,361   $(116,705)
                               --------   ---------   --------   ---------

Loss from discontinued
 FCT operations                       -           -       (432)          -
Loss on sale of FCT Division          -           -       (380)          -
                               --------   ---------   --------   ---------
Net income (loss)              $ 22,681   $(101,841)  $ 52,549   $(116,705)
                               ========   =========   ========   =========

Net income (loss) per share 
 from continued operations:
  Basic                        $   0.45   $   (1.97)  $   1.05   $   (2.27)
                               ========   =========   ========   =========
  Diluted                      $   0.35   $   (1.97)  $   0.84   $   (2.27)
                               ========   =========   ========   =========

Loss per share from 
 discontinued operations:
  Basic                        $      -   $       -   $  (0.01)  $       -
                               ========   =========   ========   =========
  Diluted                      $      -   $       -   $  (0.01)  $       -
                               ========   =========   ========   =========

Net income (loss) per share:
  Basic                        $   0.45   $   (1.97)  $   1.04   $   (2.27)
                               ========   =========   ========   =========
  Diluted                      $   0.35   $   (1.97)  $   0.83   $   (2.27)
                               ========   =========   ========   =========

Weighted average shares
 outstanding:
  Basic                          50,873      51,813     50,652      51,512
  Diluted                        67,943      51,813     69,187      51,512


                                Three months ended      Nine months ended
                                     June 30,               June 30,
                                 2004        2005        2004       2005
Additional financial data:     --------   ---------   --------   ---------

Depreciation and amortization  $  7,364   $   6,872   $ 23,282   $  20,873

Capital expenditures           $  2,054   $   2,372   $  8,076   $   8,710

                                                            June 30,
                                                          2004      2005
                                                      --------   ---------

Backlog of orders                                     $104,000   $  81,000

Number of employees                                      3,322       3,333


                  KULICKE & SOFFA INDUSTRIES, INC.
                    CONSOLIDATED BALANCE SHEET
                          (In thousands)
                                                        (Unaudited)
                                          September 30,   June 30,
                                              2004          2005
                                           ----------    ----------
                              ASSETS

CURRENT ASSETS
Cash and cash equivalents                  $   60,333    $   55,699
Restricted cash                                 3,257         3,497
Short-term investments                         32,176        29,499
Accounts and notes receivable (less
 allowance for doubtful accounts:
 9/30/04 - $3,646; 6/30/05 - $3,310)          110,718       119,478
Inventories, net                               58,017        51,084
Assets held for sale                            6,072             -
Prepaid expenses and other current assets      10,310        11,133
Deferred income taxes                          12,417        11,800
                                           ----------    ----------

  TOTAL CURRENT ASSETS                        293,300       282,190

Property, plant and equipment, net             51,434        46,719
Intangible assets, (net of accumulated
 amortization: 9/30/04 - $35,209;
 6/30/05 - $41,435)                            54,045             -
Goodwill                                       81,440        29,684
Other assets                                    7,463         6,459
                                           ----------    ----------

  TOTAL ASSETS                             $  487,682    $  365,052
                                           ==========    ==========

            LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Current portion of long term debt          $      202    $   10,304
Accounts payable                               50,002        43,665
Accrued expenses                               37,660        32,000
Income taxes payable                           11,986        13,900
                                           ----------    ----------           
  TOTAL CURRENT LIABILITIES                    99,850        99,869

Long term debt                                275,725       270,570
Other liabilities                               8,112         7,026
Deferred taxes                                 36,975        31,889
                                           ----------    ----------

  TOTAL LIABILITIES                           420,662       409,354
                                           ----------    ----------

Commitments and contingencies                       -             -

SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, without par value               213,847       218,111
Retained earnings (deficit)                  (139,912)     (256,617)
Accumulated other comprehensive loss           (6,915)       (5,796)
                                           ----------    ----------

  TOTAL SHAREHOLDERS' EQUITY (DEFICIT)         67,020       (44,302)
                                           ----------    ----------
  TOTAL LIABILITIES AND
   SHAREHOLDERS' EQUITY (DEFICIT)          $  487,682    $  365,052
                                           ==========    ==========


                  KULICKE & SOFFA INDUSTRIES, INC.
               OPERATING RESULTS BY BUSINESS SEGMENT
                         (In thousands)
                           (Unaudited)

Fiscal 2005:
                               Packaging
Quarter ended       Equipment  Materials    Test     Corporate
June 30, 2005:       Segment    Segment    Segment   and Other Consolidated
                    ---------  ---------  ---------  ---------  ---------

Net revenue         $  48,382  $  69,219  $  20,609  $       -  $ 138,210
Cost of sales          28,097     57,085     19,986          -    105,168
                    ---------  ---------  ---------  ---------  ---------
Gross profit           20,285     12,134        623          -     33,042
Operating costs        13,352      6,067     13,563      4,314     37,296
Asset impairment            -          -     48,820          -     48,820
Goodwill impairment         -          -     51,756          -     51,756
(Gain) loss on sale
 of assets             (1,563)         -          -          -     (1,563)
                    ---------  ---------  ---------  ---------  ---------
Income (loss) from
 operations         $   8,496  $   6,067  $(113,516) $  (4,314) $(103,267)
                    =========  =========  =========  =========  =========

Nine months ended 
 June 30, 2005:

Net revenue         $ 116,716  $ 196,853  $  65,731  $       -  $ 379,300
Cost of sales          68,078    160,422     60,935          -    289,435
                    ---------  ---------  ---------  ---------  ---------
Gross profit           48,638     36,431      4,796          -     89,865
Operating costs        38,460     18,130     37,911     11,926    106,427
Asset impairment            -          -     48,820          -     48,820
Goodwill impairment         -          -     51,756          -     51,756
(Gain) loss on sale
 of assets             (1,563)         -     (1,497)         -     (3,060)
                    ---------  ---------  ---------  ---------  ---------
Income (loss) from
 operations         $  11,741  $  18,301  $(132,194) $ (11,926) $(114,078)
                    =========  =========  =========  =========  =========

Fiscal 2004:
                               Packaging
Quarter ended       Equipment  Materials    Test     Corporate
June 30, 2004:       Segment    Segment    Segment   and Other Consolidated
                    ---------  ---------  ---------  ---------  ---------

Net revenue         $  95,732  $  61,740  $  37,156  $       -  $ 194,628
Cost of sales          55,940     47,796     25,820          -    129,556
                    ---------  ---------  ---------  ---------  ---------
Gross profit           39,792     13,944     11,336          -     65,072
Operating costs        14,889      5,776     10,437      4,671     35,773
                    ---------  ---------  ---------  ---------  ---------
Income (loss) from
 operations         $  24,903  $   8,168  $     899  $  (4,671) $  29,299
                    =========  =========  =========  =========  =========

Nine months ended 
 June 30, 2004:

Net revenue         $ 312,172  $ 167,418  $  90,678  $       -  $ 570,268
Cost of sales         181,522    129,968     69,810          -    381,300
                    ---------  ---------  ---------  ---------  ---------
Gross profit          130,650     37,450     20,868          -    188,968
Operating costs        45,418     16,209     34,559     14,488    110,674
Resizing (recovery)
 costs                      -          -          -        (68)       (68)
Asset impairment            -          -      3,293          -      3,293
(Gain) loss on sale
 of assets                  -          -        (85)      (709)      (794)
                    ---------  ---------  ---------  ---------  ---------
Income (loss) from
 operations         $  85,232  $  21,241  $ (16,899) $ (13,711) $  75,863
                    =========  =========  =========  =========  =========

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