Fei (FEIC) 8-K Results of Operations and Financial Condition

Exhibit 99.1

               

NEWS RELEASE

For more information contact:

FEI Company

Fletcher Chamberlin

Investor Relations

(503) 726-7710

FEI Company Revises Impairment Charge for Second Quarter of 2005

HILLSBORO, Ore., August 8, 2005  – FEI Company (NASDAQ: FEIC) revised its results for the second quarter of 2005 to exclude an impairment charge.

On August 3, 2005, the company issued a press release announcing results for the second quarter of 2005, which ended on July 3, 2005. In the release, FEI described an impairment of goodwill related to parts of our semiconductor business. This impairment of goodwill amounted to $21.6 million, or $0.65 per basic and diluted share for the quarter. On August 8, 2005, following further review, the company concluded that it would not include an impairment of the goodwill in the financial statements for the quarter. Accordingly, this charge will not be included in the statement of operations reported in the Form 10-Q which will be filed with the Securities and Exchange Commission later this week.

The revised condensed financial statements for the quarter and year to date period ended July 3, 2005 are attached to this release.

Analyst Conference and Web cast Call – 8:00 a.m. PDT Tuesday, August 9, 2005

FEI will be hosting its annual analyst conference on Tuesday, August 9, 2005 which will be web cast to all interested parties.  Interested parties may access the presentation via the web by going to FEI’s Investor Relations page at http://www.feicompany.com. During this conference we plan to discuss this issue as well as business trends and other factors that impact FEI. The conference is scheduled to begin at 8:00 a.m. PDT and is expected to last approximately 2 hours.

About FEI

FEI’s Tools for Nanotech™, featuring focused ion- and electron-beam technologies, deliver 3D characterization, analysis and modification capabilities with resolution down to the sub-Ångstrom

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level. With R&D centers in North America and Europe and sales and service operations in more than 40 countries around the world, FEI is bringing the nanoscale within the grasp of leading researchers and manufacturers and helping to turn some of the biggest ideas of this century into reality. More information can be found on the FEI website at: http://www.feicompany.com.

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FEI Company and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

	July 3,			April 3,		December 31,
	2005			2005		2004
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	88,280		$	158,257	$	130,682
Short-term investments in marketable securities	126,166			160,889		173,681
Receivables	116,877			135,406		160,276
Inventories	91,976			92,604		87,783
Deferred tax assets	2,032			7,394		8,365
Other current assets	30,344			22,936		29,804
Total current assets	455,675			577,486		590,591
NON-CURRENT INVESTMENTS IN MARKETABLE SECURITIES	57,264			36,614		33,850
LONG-TERM RESTRICTED CASH	4,359			3,963		4,177
PROPERTY PLANT AND EQUIPMENT, NET	65,312			71,270		71,550
PURCHASED TECHNOLOGY, NET	9,603			20,613		22,080
GOODWILL	41,461			41,476		41,486
DEFERRED TAX ASSETS	6,690			24,409		18,555
OTHER ASSETS, NET	49,076			55,912		59,505
TOTAL	$	689,440		$	831,743	$	841,794
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	34,244		$	41,266	$	36,618
Current accounts with Philips	2,757			4,766		4,240
Accrued payroll liabilities	10,898			13,762		15,070
Accrued warranty reserves	8,479			9,784		10,052
Deferred revenue	42,278			44,809		43,349
Income taxes payable	9,074			5,390		7,962
Accrued restructuring, reorganization and relocation	693			706		1,020
Other current liabilities	31,257			30,875		37,128
Total current liabilities	139,680			151,358		155,439
CONVERTIBLE DEBT	225,000			295,000		295,000
DEFERRED TAX LIABILITIES	5,076			5,638		6,412
OTHER LIABILITIES	4,831			5,195		5,373
SHAREHOLDERS’ EQUITY:
Preferred stock - 500 shares authorized; none issued and outstanding	—			—		—
Common stock - 70,000 shares authorized; 33,653; 33,493 and 33,413 shares issued and outstanding at July 3, 2005; April 3, 2005; and  December 31, 2004	318,769			317,777		315,632
Accumulated earnings (deficit)	(20,285		)	25,500		22,077
Accumulated other comprehensive income	16,369			31,275		41,861
Total shareholders’ equity	314,853			374,552		379,570
TOTAL	$	689,440		$	831,743	$	841,794

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FEI Company and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Thirteen Weeks Ended									Twenty Six Weeks Ended
	July 3,			April 3,			July 4,			July 3,			July 4,
	2005			2005			2004			2005			2004
NET SALES:
Products	$	82,312		$	95,753		$	86,551		$	178,065		$	170,825
Service	25,181			25,240			21,917			50,421			42,737
Total net sales	107,493			120,993			108,468			228,486			213,562
COST OF SALES:
Products	52,840			53,475			49,569			106,315			98,969
Service	17,992			18,581			15,138			36,573			28,801
Total cost of sales	70,832			72,056			64,707			142,888			127,770
Gross profit	36,661			48,937			43,761			85,598			85,792
OPERATING EXPENSES:
Research and development	15,867			16,187			13,131			32,054			26,698
Selling, general and administrative	25,174			25,313			22,764			50,487			42,878
Amortization of purchased technology	1,517			1,342			1,413			2,859			2,826
Asset impairment	15,944			—			—			15,944			—
Restructuring, reorganization and relocation	1,124			—			488			1,124			707
Total operating expenses	59,626			42,842			37,796			102,468			73,109
OPERATING INCOME (LOSS)	(22,965		)	6,095			5,965			(16,870		)	12,683
OTHER INCOME (EXPENSE):
Interest income	1,905			1,814			1,288			3,719			2,351
Interest expense	(3,982		)	(2,507		)	(2,611		)	(6,489		)	(5,079		)
Other expense, net	(993		)	(216		)	57			(1,209		)	(2,355		)
Total other expense, net	(3,070		)	(909		)	(1,266		)	(3,979		)	(5,083		)
INCOME (LOSS) BEFORE TAXES	(26,035		)	5,186			4,699			(20,849		)	7,600
INCOME TAX EXPENSE	19,750			1,763			1,645			21,513			2,660
NET INCOME (LOSS)	$	(45,785	)	$	3,423		$	3,054		$	(42,362	)	$	4,940
PER SHARE DATA:
Basic earnings (loss) per share	$	(1.36	)	$	0.10		$	0.09		$	(1.26	)	$	0.15
Diluted earnings (loss) per share	$	(1.36	)	$	0.09		$	0.08		$	(1.26	)	$	0.12
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	33,544			33,456			33,241			33,500			33,213
Diluted	33,544			39,878			39,734			33,500			39,724

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FEI Company and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Thirteen Weeks Ended			Twenty Six Weeks Ended
	July 3,	April 3,	July 4,	July 3,	July 4,
	2005	2005	2004	2005	2004
NET SALES:
Products	76.6%	79.1%	79.8%	77.9%	80.0%
Service	23.4%	20.9%	20.2%	22.1%	20.0%
Total net sales	100.0%	100.0%	100.0%	100.0%	100.0%
COST OF SALES:
Products	49.2%	44.2%	45.7%	46.5%	46.3%
Service	16.7%	15.4%	14.0%	16.0%	13.5%
Total cost of sales	65.9%	59.6%	59.7%	62.5%	59.8%
Gross profit	34.1%	40.4%	40.3%	37.5%	40.2%
OPERATING EXPENSES:
Research and development	14.8%	13.4%	12.1%	14.0%	12.5%
Selling, general and administrative	23.4%	20.9%	21.0%	22.1%	20.1%
Amortization of purchased technology	1.4%	1.1%	1.3%	1.3%	1.3%
Asset impairment	14.8%	0.0%	0.0%	7.0%	0.0%
Restructuring, reorganization and relocation	1.0%	0.0%	0.4%	0.5%	0.3%
Total operating expenses	55.5%	35.4%	34.8%	44.8%	34.2%
OPERATING INCOME (LOSS)	-21.4%	5.0%	5.5%	-7.4%	5.9%
OTHER INCOME (EXPENSE):
Interest income	1.8%	1.5%	1.2%	1.6%	1.1%
Interest expense	-3.7%	-2.1%	-2.4%	-2.8%	-2.4%
Other expense, net	-0.9%	-0.2%	0.1%	-0.5%	-1.1%
Total other expense, net	-2.9%	-0.8%	-1.2%	-1.7%	-2.4%
INCOME (LOSS) BEFORE TAXES	-24.2%	4.3%	4.3%	-9.1%	3.6%
INCOME TAX EXPENSE	18.4%	1.5%	1.5%	9.4%	1.2%
NET INCOME (LOSS)	-42.6%	2.8%	2.8%	-18.5%	2.3%

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FEI COMPANY

Supplemental Data

($ In Millions Except Per Share Amounts)

(Unaudited)

	Q2 Ended			Q1 Ended			Q2 Ended
	7/3/2005			4/3/2005			7/4/2004
Income Statement Highlights
Consolidated sales	$	107.5		$	121.0		$	108.5
Gross margin	34.1		%	40.4		%	40.3		%
R & D spending	$	15.9		$	16.2		$	13.1
R & D (% of sales)	14.8		%	13.4		%	12.1		%
SG&A	$	25.2		$	25.3		$	22.8
SG&A (% of sales)	23.4		%	20.9		%	21.0		%
Net income (loss) - GAAP	$	(45.8	)	$	3.4		$	3.1
Diluted earnings (loss) per share - GAAP	$	(1.36	)	$	0.09		$	0.08
Sales by Business Segment
MicroElectronics	$	45.9		$	57.7		$	54.4
Electron Optics	$	34.7		$	36.1		$	29.5
Service	$	25.2		$	25.2		$	21.9
Components	$	1.7		$	2.0		$	2.7
Sales by Market Sector
Semiconductor	$	43.9		$	60.4		$	55.4
Data Storage	$	13.3		$	7.5		$	11.5
I & I	$	50.3		$	53.1		$	41.5
Sales by Geography
North America	$	33.8		$	33.7		$	46.9
Europe	$	47.4		$	45.2		$	24.7
Asia Pacific	$	26.3		$	42.1		$	36.8
Bookings
Total	$	112.8		$	124.3		$	125.4
Book to bill ratio	1.05			1.03			1.16
Backlog - total	$	168.6		$	163.3		$	141.9
Backlog - Service	$	40.7		$	39.6		$	31.5
Bookings by Business Segment
MicroElectronics	$	44.1		$	40.1		$	70.1
Electron Optics	$	40.7		$	48.4		$	32.8
Service	$	26.2		$	33.9		$	19.7
Components	$	1.8		$	1.9		$	2.8
Bookings by Market Sector
Semiconductor	$	32.3		$	48.2		$	66.1
Data Storage	$	15.1		$	9.6		$	15.0
I & I	$	65.4		$	66.4		$	44.3
Balance Sheet Highlights
Cash, equivalents, investments, restricted cash	$	276.1		$	359.7		$	311.3
Operating cash (used) generated	$	(11.9	)	$	29.6		$	10.8
Accounts receivable	$	116.9		$	135.4		$	123.3
Days sales outstanding (DSO)	99			102			104
Inventory turnover	3.1			3.1			2.8
Inventories	$	92.0		$	92.6		$	92.2
Property, plant and equipment	$	65.3		$	71.3		$	72.4
Fixed asset investment (during quarter)	$	4.7		$	4.4		$	3.7
Depreciation expense	$	4.0		$	4.1		$	3.9
Current liabilities	$	139.7		$	151.4		$	106.7
Working Capital	$	316.0		$	426.1		$	431.9
Shareholders’ equity	$	314.9		$	374.6		$	341.8
Headcount (permanent and temporary)	1,780			1,813			1,715

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